Corporation Tax Act 2010 section 226

Conditions to be met in relation to loans

Section 226 sets out three conditions (A, B and C) that a loan to a Community Development Finance Institution (CDFI) must satisfy in order to qualify as a community investment tax relief investment.

• The CDFI must receive the full loan amount on the investment date, or if drawdown is permitted over time, it must be completed within 18 months of that date (Condition A).
• The loan must not carry any right, present or future, to be converted or exchanged into any instrument redeemable within the five-year period (Condition B).
• The loan terms must restrict early repayment: no repayment of capital in years one and two, no more than 25% by end of year three, no more than 50% by end of year four, and no more than 75% by end of year five (Condition C).
• The repayment restrictions under Condition C do not apply where repayment is triggered by the CDFI breaching a standard commercial loan obligation that would exist regardless of the tax relief rules.