Corporation Tax Act 2010 section 762

Deemed loan relationship if borrower is partnership with corporate member

Section 762 applies the loan relationship rules where a Type 1 finance arrangement exists and the borrower is a partnership that has at least one corporate member.

• Where a Type 1 finance arrangement involves a partnership as borrower and a company is a member of that partnership, the advance is treated as a money debt owed by the partnership and the arrangement is treated as a debtor loan relationship of the partnership
• Any finance charge recorded under generally accepted accounting practice in either the company's or the partnership's accounts is treated as interest payable by the partnership under the deemed loan relationship
• The deemed interest is treated as paid by splitting the periodic payments into capital repayment and interest elements, with the deemed interest recognised as paid when those interest elements are paid
• The section applies either where section 759 prevents the arrangement from having its normal tax effect for a corporate partner, or where section 760 applies to treat payments as the partnership's income