Section 452 | Exchange gains and losses where loan not on arm's length terms

(1)This subsection applies if—

(a)a company would be treated as having a debtor relationship, or would be treated as borrowing more under an existing debtor relationship, in relation to an accounting period if—

(i)an election were made under section 153B(2) of TIOPA 2010 in relation to that period,

(ii)a claim were made under section 192(1) of that Act in relation to that period, or

(iii)such an election and such a claim were made in relation to that period, and

(b)for that period there is a connection between that company and the company that would have the corresponding creditor relationship.

(2)If subsection (1) applies, it is assumed that such a election, claim or election and claim is made for the purpose of determining the debits or credits to be brought into account for the purposes of this Part in respect of any exchange gains or losses arising in that period in respect of the liability representing that debtor relationship.

(3)Subsections (4) and (5) apply if, because of one or more elections or claims made under section 153B(2) or 192(1) of TIOPA 2010 or assumed to have been made as a result of subsection (2)—

(a)one company is treated for any purpose as having a debtor relationship, or is treated as borrowing more under an existing debtor relationship, or

(b)more than one company is treated for any purpose as having a debtor relationship represented by the same liability.

(4)The total amount of the credits brought into account for the purposes of this Part in respect of exchange gains from that debtor relationship (in a subsection (3)(a) case) or from those debtor relationships (in a subsection (3)(b) case) must not exceed the total amount of the exchange gains or the proportion of the exchange gains to be left out of account ... by the borrower in respect of the loan relationship as a result of Part 4 of TIOPA 2010.

(5)The total amount of the debits brought into account for those purposes in respect of exchange losses from that debtor relationship (in a subsection (3)(a) case) or from those debtor relationships (in a subsection (3)(b) case) must not exceed the total amount of the exchange losses or the proportion of the exchange losses to be left out of account ... by the borrower in respect of the loan relationship as a result of Part 4 of TIOPA 2010.

(5A)In this section “borrower” is to be construed in accordance with section 191(1)(a) of TIOPA 2010.

(6)Section 466 (companies connected for an accounting period) applies for the purposes of this section.