Taxation (International and Other Provisions) Act 2010 section 467

Holdings of debt and equity in same proportions

Section 467 treats lenders as related parties of a borrower where they hold both debt and equity in that borrower in matching proportions and collectively have a 25% investment.

• Where a group of lenders lend money to a company and also hold shares or voting power in it, and their lending and equity stakes are in the same or substantially the same proportions, the lenders are treated as related parties of the borrower for corporate interest restriction purposes — provided they collectively hold a 25% investment.
• This related party treatment applies to the loans themselves and to anything done under or in connection with those loans, even if the lenders would not otherwise be considered related parties.
• If any rights under such a loan are transferred to another person, the transferee is also treated as a related party of the borrower, regardless of whether the transferee holds any shares or voting power in the borrower.
• The rule extends beyond loans to cover any other financial liability owed to the lenders or any transaction with the borrower, and references to shares include rights to acquire shares and interests of a similar character to shares.