Corporation Tax Act 2010 section 29

Association through a loan creditor

Section 29 provides rules for ignoring certain loan creditors when determining whether companies are associated with each other for corporation tax purposes.

• A loan creditor can be ignored as an associate of the borrowing company if three conditions are met: the creditor is a loan creditor only, there is no connection between the creditor and the borrowing company, and the loan relationship is one of a normal commercial lending nature.
• Where two companies would otherwise be treated as associated because they are both controlled by the same loan creditor, that association can also be disregarded provided the loan creditor meets the equivalent conditions in relation to each company.
• For these purposes, "control" is based on the standard definition but is modified to exclude certain loan creditors, to prevent attribution of certain partners' rights, to eliminate certain fixed-rate preference shares, and to eliminate certain trustee companies.
• A "loan creditor" is defined by reference to the wider tax code, but importantly a bank is not treated as a loan creditor merely because it has made an ordinary commercial bank loan.