Corporation Tax Act 2010 section 163

Normal commercial loans: company's results or value of assets

Section 163 clarifies the circumstances in which certain interest rate variations and loan security arrangements do not prevent a loan from being treated as a normal commercial loan for group relief purposes.

• A loan remains a normal commercial loan even if the interest rate moves inversely to the company's business performance — falling when results improve or rising when they worsen.
• A loan also remains a normal commercial loan even if the interest rate moves inversely to the value of the company's assets — falling when asset values rise or rising when they fall.
• A loan used to acquire land (not for resale at a profit) is not disqualified simply because the lender's only means of enforcing repayment is through security over that land.
• For the land acquisition exception to apply, the entire loan must be used for the land purchase or related incidental costs, and the land must be the only security provided.