Citation, commencement and interpretation

1. —(1) These Regulations may be cited as the Corporation Tax (Exclusion from Short-Term Loan Relationships) Regulations 2009.

(2) These Regulations shall come into force on 1st January 2010.

(3) In these Regulations “FA 2009” means the Finance Act 2009.

Exclusion from short-term loan relationship

2. For the purposes of paragraph 60 of Schedule 15 to FA 2009 (intra-group short-term finance: financing expense), a finance arrangement is not to be taken as a short-term loan relationship for the relevant period or any parts of the relevant period where—

(a) any part or all of the finance arrangement is made for a long-term funding purpose; or

(b) the finance arrangement is a long-term aggregated loan relationship.

Meaning of long-term funding purpose

3. —(1) A finance arrangement is made for a long-term funding purpose where at the date the finance arrangement is made—

(a) to the extent that the finance arrangement provides for the creation of money debt, it is reasonable to expect that all the money debt created under it will not be settled within 12 months of the money debt first being created under it, and

(b) to the extent that the finance arrangement is otherwise a loan relationship, it is reasonable to expect that it will not terminate within 12 months of its coming into force; or

(c) the conditions in regulation 4 are met.

(2) For the purposes of this regulation circumstances where it is reasonable to expect that the finance arrangement will not be settled or terminated within 12 months include circumstances where—

(a) the finance arrangement may be settled or terminated by use of borrowing; or

(b) the finance arrangement may be settled or terminated temporarily by funds available for a limited period of time.

Anti-avoidance

4. —(1) A sequence of finance arrangements is considered to be a single finance arrangement made for a long-term funding purpose if the following conditions are met.

(2) The first condition is that the sequence of finance arrangements when taken together will not be settled or terminated within 12 months.

(3) The second condition is that the sequence of finance arrangements is part of a scheme or arrangement the main purpose, or one of the main purposes, of which is to characterise a loan relationship as a short-term loan relationship for the purposes of paragraph 60 of Schedule 15 to FA 2009.

Long-term aggregated loan relationship

5. —(1) A number of finance arrangements are long-term aggregated loan relationships if the following conditions are met.

(2) The first condition is that the finance arrangements exist between the same two companies.

(3) The second condition is that there are no repayment terms relating specifically to each separate finance arrangement.

(4) The third condition is that accounts show the finance arrangements as a single net balance between the companies at all times.

(5) The fourth condition is that the finance arrangements when taken together do not meet the conditions mentioned in paragraph 62(1) of Schedule 15 to FA 2009.