Taxation (International and Other Provisions) Act 2010 section 456

Creditor relationships of companies determined on basis of fair value accounting

Section 456 allows companies that hold loan receivables (creditor relationships) at fair value in their accounts to elect to have those relationships treated as if accounted for on an amortised cost basis when calculating their tax-interest amounts under the corporate interest restriction rules.

• A company can elect for all its fair-value creditor relationships to be recalculated on an amortised cost basis for corporate interest restriction purposes, and this election is irrevocable once made.
• The election must be made within 12 months of the end of the first accounting period in which the company holds a fair-value creditor relationship (or, if that period ended before 1 April 2017, the first period to which the corporate interest restriction rules apply).
• Where a hedging instrument is linked to a loan relationship covered by the election, the amortised cost calculation assumes the hedge has been designated as a fair value hedge of that loan for accounting purposes.
• For insurance companies, friendly societies and Lloyd's underwriters, the amortised cost basis is restricted to recognising only interest accrued in the period (or amounts reasonably equivalent to interest for holdings in open-ended investment companies, unit trusts and offshore funds).