Corporation Tax Act 2010 section 761

Deemed loan relationship if borrower is a company

Section 761 ensures that where a type 1 finance arrangement involves a company as the borrower, the arrangement is treated as a loan relationship for corporation tax purposes, so that the normal loan relationship rules in CTA 2009 apply.

• Where a type 1 finance arrangement exists and the borrower is a company, and either section 759 prevents the arrangement from having its intended tax effect or section 760 applies, the arrangement falls within this section.
• The advance received by the company is treated as a money debt it owes, and the whole arrangement is deemed to be a debtor loan relationship of the company for the purposes of the CTA 2009 loan relationship rules.
• Any finance charge recorded in the company's accounts under generally accepted accounting practice in respect of the advance is treated as interest payable under the deemed loan relationship.
• To determine when this deemed interest is treated as paid, the periodic payments under the arrangement are split into capital repayment and interest elements, and the deemed interest is treated as paid at the times those interest elements are actually paid.