Corporation Tax Act 2009 section 453

Connected parties deriving benefit from creditor relationships

Section 453 addresses situations where a company lends money at below-market rates and a connected company benefits as a result, requiring the lending company to bring the value of that benefit into account as taxable credits.

• Where a company receives less than a commercial return on a loan relationship, and a connected company benefits as a consequence, the lending company must recognise credits for the value of that benefit.
• This provision targets arrangements where a borrower diverts what would normally be interest payments to a connected company that is not itself a party to the loan relationship.
• The credits brought into account represent the benefit derived by the connected company, effectively treating the foregone return as taxable income of the lending company.
• The rule is an anti-avoidance measure designed to prevent companies from exploiting loan relationships to shift value to connected parties without tax consequences.