Taxation (International and Other Provisions) Act 2010 section 470

Ordinary independent financing arrangements by banks and others

Section 470 provides that certain loan relationships between parties who happen to be related are not treated as related-party transactions where the lending arose independently of the relationship that connects them.

• Where a creditor (C) and debtor (D) are related parties under a loan relationship, but the loan was not made because of, or in connection with, the circumstances that make them related, special treatment applies.
• In such cases, C and D are treated as if they were not related parties for the purposes of the worldwide debt cap rules in this Part of the Act.
• This is designed to cover situations such as banks lending in the ordinary course of business, where the lending decision was made independently of any connection that happens to exist between the bank and the borrower.
• The effect is that the loan will not be caught by the stricter rules that apply to related-party financing arrangements.