Section 375 | Loans to close companies by participators etc

(1)The case to which this section applies is where—^F1

(a)there is a time in the actual accrual period when the close company conditions are met, and

(b)neither the CIS-based close company conditions nor the CIS limited partnership conditions are met

and, where subsection (4A) applies, the non-qualifying territory condition is met.

(2)The close company conditions are that—

(a)the company which has the debtor relationship (“D”) is a close company, and

(b)a person (“C”) standing in the position of creditor as respects the loan relationship is—

(i)a participator in D,

(ii)the associate of a person who is participator in D,

(iii)a company of which a participator in D has control,

(iv)a company in which a participator in D has a major interest,

(v)a person who controls a company which is a participator in D,

(vi)the associate of a person within sub-paragraph (v), or

(vii)a company controlled by a person within sub-paragraph (v).

(3)The CIS-based close company conditions are that—

(a)D is a CIS-based close company at all times when the close company conditions are met,

(b)C is not resident for tax purposes in a non-qualifying territory at any such time, and^F2

(c)D is a small or medium-sized enterprise for the actual accrual period.

(4)The CIS limited partnership conditions are that—

(a)the debt is one which is owed to, or to persons acting for, a CIS limited partnership,

(b)no member of that partnership is resident for tax purposes in a non-qualifying territory at any time in the actual accrual period,^F3

(c)D has received written notice from the partnership containing information from which it appears that the condition in paragraph (b) is met, and

(d)D is a small or medium-sized enterprise for the actual accrual period.

(4A)This subsection applies if C is a company; and the non-qualifying territory condition is that C is—^F4

(a)resident for tax purposes in a non-qualifying territory at any time in the actual accrual period, or^F4

(b)effectively managed in a non-taxing non-qualifying territory at any such time.^F4

(5)Section 376 applies for the interpretation of this section.