Corporation Tax Act 2009 section 537

Payments in return for capital contribution to partnership

Section 537 deals with arrangements where a company invests in a partnership and receives a return that behaves like interest, even though it is structured as a capital contribution to the firm.

• Where a company acquires an interest in a firm by making a capital contribution, any return on that contribution may be treated as a loan relationship if it resembles interest.
• The provision targets arrangements designed to produce interest-like returns through a partnership structure rather than through a straightforward lending arrangement.
• The rules ensure that the economic substance of the arrangement is taxed consistently with how a direct loan would be taxed under the loan relationships regime.
• The legislation distinguishes between a "partnership" (the legal relationship between partners) and a "firm" (the collective group of partners), in line with the Partnership Act 1890.