CFM33250 - Loan relationships: the matters and computational rules: amounts not brought into account: imported losses

CTA09/S327

Imported losses

CTA09/S327 is an anti-avoidance provision which prevents companies obtaining tax relief for losses that arise whilst the company is not within the UK tax net. For instance, a company may become resident in the UK in a period at a time when it is a party to creditor relations whose economic value is less than their carrying value on migration, applying an amortised cost basis of accounting, as a result of events that occurs before migration. This provision prevents a company obtaining tax relief for a debit arising after migration to the extent that the loss represented by the debit arose before it migrated to the UK.

When does it apply?

CTA09/S327 applies when, in an accounting period

• a company is not using {fair value accounting

  CFM33130}, and

• a loss arises in respect of a loan relationship, and
• the loss is ‘referable in whole or in part to a time when the relationship was not subject to UK taxation’.

It prevents the loss being deductible either under CTA09/PT5 or any other provision.

Accounting basis

S327 does not apply when a company is using a fair value basis of accounting.

Losses only

S327 does not apply where there is a profit in an accounting period in respect of a loan relationship, even where that profit would have been bigger but for an ‘imported loss’. It applies only to disallow part or all of a loss.

S327 applies both to debtor and creditor relationships.

See also CFM33260 and CFM33270