Section 769 | Deemed loan relationship

(1)This section applies if—

(a)there is a type 3 finance arrangement, and

(b)a relevant member is a company within the charge to corporation tax.

(2)In relation to the company—

(a)the advance is treated for the purposes of Chapter 9 of Part 5 of CTA 2009 (and the other provisions of that Part (loan relationships)) as a money debt owed by the partnership, and

(b)the arrangement is treated as a transaction for the lending of money from which the debt is treated as arising for those purposes.

(3)Any amount which in accordance with generally accepted accounting practice is recorded in the partnership's accounts as a finance charge in respect of the advance is treated as interest payable by the partnership under the transaction.

(4)The reference in subsection (3) to the partnership's accounts includes a reference to the accounts of any relevant member.

(5)If an amount is treated as interest (“deemed interest”) under subsection (3), to find out when it is paid—

(a)treat the payments mentioned in section 767(2)(d) as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance,

(b)treat the interest elements of the payments as paid when the payments are paid, and

(c)treat the deemed interest as paid at the times when the interest elements are treated as paid.

(6)A relevant member is a person who—

(a)was a member of the partnership immediately before the relevant change in relation to it occurred, and

(b)is not the lender.