CFM33010 | Loan relationships: core rules: overview

CTA09/S306-S320B

Overview of the core rules

The loan relationship rules in Part 5 of CTA09 provide an exclusive regime for the taxation of corporate debt. Chapter 3 of Part 5 sets out the core rules for determining the credits and debits to be brought into account under the regime.

In particular, the chapter:

• defines the ‘matters’ in respect of which amounts are to be brought into account (S306A)

• sets out the ‘general rule’ that the amounts to be brought into account are those which are those that are recognised in determining the company’s profit or loss for the period in accordance with GAAP (S307-S309)

• provides rules to bring in certain additional amounts recognised in the carrying value of certain assets and liabilities (S320), recognised in other comprehensive income (S320A), and recognised direct in equity (S320A)

• provide further rules to bring in transitional amounts where a company changes the accounting basis of a loan from the end of one period to the start of the next period (S315-S319)

Pre-2016 rules

Significant changes were made to the structure of the core operative provisions of the loan relationship rules by F(2)A15. The amended provisions apply for accounting periods beginning on or after 1 January 2016.

Previously, S307 combined the rules setting out both the scope of the rules and the general rule with how to calculate the amounts to be brought into account. In addition, the general rule sought to bring into account all amounts recognised in the accounts, subject to specific rules modifying this treatment.

CFM33160+ explains these pre-2016 rules.

Further guidance

CFM33020 - the ‘matters’

CFM33070 - following the accounts

CFM33110 - change in accounting basis

CFM33130 - amounts taken to carrying value of an asset or liability

CFM33140 - amounts in other comprehensive income (OCI)

CFM33150 - direct in equity

CFM33160 - pre-2016 rules