Section 412 | Section 411: interpretation

(1)For the purposes of section 411(1)(b), expenses are “ancillary” to a loan relationship or related transaction if and only if they are incurred directly—

(a)in bringing, or attempting to bring, the relationship into existence,

(ab)in entering into or giving effect to, or attempting to enter into or give effect to, the related transaction,

(b)in making payments under the loan relationship or as a result of the related transaction, or

(c)in taking steps to ensure the receipt of payments under the loan relationship or in accordance with the related transaction.

(2)For the purposes of section 411(1)(e) and (2)(d) a derivative contract is “relevant” if its underlying subject matter consists only of one or more of the following—

(a)interest rates;

(b)any index determined by reference to income or retail prices;

(c)currency;

(d)an asset or liability representing a loan relationship;

(e)any other underlying subject matter which is—

(i)subordinate in relation to any of the matters mentioned in paragraphs (a) to (d), or

(ii)of small value in comparison with the value of the underlying subject matter as a whole.

(3)Whether part of the underlying subject matter of a derivative contract is subordinate or of small value is to be determined for the purposes of subsection (2)(e) by reference to the time when the company enters into or acquires the contract.

(3A)For the purposes of section 411(1)(e)(iii) and (2)(d)(iii) losses or gains are in respect of risks arising in the ordinary course of “a financial trade” only so far as the risks relate to amounts which are or are likely to be—

(a)relevant expense amounts, or

(b)relevant income amounts,

of the worldwide group for any period of account.

(4)For the purposes of section 411(1)(f) expenses are “ancillary” to a relevant derivative contract or related transaction if and only if they are incurred directly—

(a)in bringing, or attempting to bring, the derivative contract into existence,

(b)in entering into or giving effect to, or attempting to enter into or give effect to, the related transaction,

(c)in making payments under the derivative contract or as a result of the related transaction, or

(d)in taking steps to secure the receipt of payments under the derivative contract or in accordance with the related transaction.

(5)For the purposes of section 411(1)(n) and (2)(l), the following provisions of Chapter 2 of Part 16 of CTA 2010 are “relevant”—

(a)section 761(3) (type 1 finance arrangements: borrower a company);

(b)section 762(3) (type 1 finance arrangements: borrower a partnership);

(c)section 766(3) (type 2 finance arrangements);

(d)section 769(3) (type 3 finance arrangements).

(6)In section 411—

(a)in subsections (1)(b) and (c) and (2)(b), “related transaction”, “exchange loss” and “exchange gain” have the same meaning as in Parts 5 and 6 of CTA 2009 (see sections 304 and 475 of that Act);

(b)in subsections (1)(e) and (f) and (2)(d), “related transaction”, “exchange loss” and “exchange gain” have the same meaning as in Part 7 of that Act (see sections 596 and 705 of that Act).

(7)In section 411 and this section—

“alternative finance arrangements” has the same meaning as in Parts 5 and 6 of CTA 2009 (see section 501(2) of that Act);

“alternative finance return” has the same meaning as in Part 6 of CTA 2009 (see sections 511 to 513 of that Act);

“creditor quasi-repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 544 of that Act);

“creditor repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 543 of that Act);

“debtor quasi-repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 549 of that Act);

“debtor repo” has the same meaning as in Chapter 10 of Part 6 of CTA 2009 (see section 548 of that Act);

“manufactured interest” has the same meaning as in Chapter 9 of Part 6 of CTA 2009 (see section 539(5) of that Act);

“underlying subject matter” has the same meaning as in Part 7 of CTA 2009 (see section 583 of that Act).