Taxation (International and Other Provisions) Act 2010 section 175

Claims under section 174 where actual provision relates to a security

Section 175 prevents a compensating adjustment claim from being made under section 174 in certain circumstances involving guaranteed loans or securities between indirectly connected parties.

• A compensating adjustment claim under section 174 is blocked where the participation condition is only met through indirect participation in financing arrangements (under sections 161 or 162), the transaction involves a security issued by one of the affected persons, and a guarantee on that security is provided by a party with a participatory relationship to the issuer.
• A participatory relationship exists where one party directly or indirectly participates in the management, control or capital of the other, or where the same person or persons participate in both parties.
• The term "security" is defined broadly to include securities that do not create or evidence a charge on assets, and also covers situations where money is advanced without a formal security being issued — in such cases, any interest or other consideration paid for the use of the money is treated as if it related to a security.
• The concept of "guarantee" is also widely drawn: it includes sureties and, where the issuer is a company, any relationship, arrangement, connection or understanding (formal or informal) that gives the lender a reasonable expectation of being repaid by one or more companies if the issuer defaults.