Section 438 | Exemption for interest payable to third parties etc

(1)Amounts that arise to a qualifying infrastructure company in a relevant accounting period are not to be regarded for the purposes of this Part as tax-interest expense amounts of the company so far as they qualify as exempt amounts in that period (see subsections (2) and (3)).

(2)An amount qualifies as an exempt amount so far as it is attributable, on a just and reasonable apportionment, to the times in the relevant accounting period when—

(a)each creditor in relation to the amount is within subsection (3) or the amount is in respect of a qualifying old loan relationship (see section 439), and

(b)the recourse of each creditor in relation to the amount is limited to relevant infrastructure matters (see subsections (4) to (6)).

(3)A creditor is within this subsection if—

(a)the creditor is not a related party of the company, or

(b)the creditor is a company which is a qualifying infrastructure company,

but section 466(2) does not apply for the purposes of paragraph (a).

(4)The recourse of a creditor is limited to relevant infrastructure matters if, in the event that the company fails to perform its obligations in question, the recourse of the creditor is limited to—

(a)income of a qualifying infrastructure company,

(b)assets of a qualifying infrastructure company, or

(c)shares in or debt issued by a qualifying infrastructure company,

whether the income, assets, shares or debt relate to the company concerned or another qualifying infrastructure company.

(5)For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is ignored if—

(a)it is provided before 1 April 2017, or

(b)it is provided at any later time by a person who, at that time, is not a related party of the company or is a relevant public body.

(5A)For the purposes of subsection (4) a guarantee, indemnity or other financial assistance in favour of the creditor is also ignored if—

(a)it is provided before 29 October 2018,

(b)the company concerned has not been UK resident at any time before that date, and

(c)the amount concerned is in respect of a loan relationship, derivative contract or relevant arrangement or transaction (within the meaning of section 382(4)) to which the member in question is a party for the purposes of its UK property business.

(6)For the purposes of subsection (4) a non-financial guarantee in favour of the creditor is ignored if—

(a)it guarantees the performance by any person of contractual obligations to provide goods or services to a qualifying infrastructure company,

(b)it is given by the person providing the goods or services or by a person who is a related party of that person, and

(c)the maximum amount for which the guarantor is liable does not exceed the consideration given under the contract for the provision of the goods or services.

(7)In this section “creditor” means—

(a)if the amount meets condition A in section 382, the person who is party to the loan relationship as creditor,

(b)if the amount meets condition B in that section, the person other than the company who is party to the derivative contract, and

(c)if the amount meets condition C in that section, the person other than the company who is party to the relevant arrangement or transaction.