CFM35890 - Loan relationships: connected parties: late interest: participation: CIS (collective investment scheme) based close companies and CIS limited partnerships

CTA09/S375(1)(a), S375(3), S375(4)

Connection through participation: CIS based close companies and CIS limited partnerships

One of the categories of connection for the {late interest rules

CFM35810} is where the creditor is a participator in a close company (S375). However, this category of connection will not apply to a close company and a participator if the following conditions are met.

For accounting periods ending on or after 1 April 2007

The debtor company is a CIS-based close company and a small or medium-sized enterprise, and the lender is not resident in a non-qualifying territory

or

The lender is a CIS limited partnership and no member of the partnership is resident in a non-qualifying territory, and the debtor company is a small or medium-sized enterprise.

For accounting periods ending on or after 4 March 2005 and before 1 April 2007

Commencement provisions for new debtor relationships

If the debtor relationship arises under a new contract made on or after 4 March 2005, the conditions applicable to accounting periods ending on or after 1 April 2007 will apply to that debtor relationship at all times on or after 4 March 2005. (F(No2)A05/SCH8/PARA4(1))

Transitional provisions for existing debtor relationships

Where a debtor relationship exists under a contract made before 4 March 2005 and continues unchanged throughout the period up to and including 31 March 2007, or where there is a change in the pre-existing contract terms on or after 4 March 2005 and before 1 April 2007, see the detailed transitional provisions at CFM35870.

For accounting periods ending on or after 10 December 2003 and ending before 4 March 2005

The debtor company is a CIS-based close company or the lender is a CIS limited partnership.

Definitions

A ‘CIS-based close company’ is a company which is only a close company because of the attribution under CTA10/S449 and CTA10/S448 of the rights and powers of partners in a CIS limited partnership to another of the partners.

A ‘CIS limited partnership’ is a limited partnership which is a collective investment scheme or which would be a collective investment scheme if it were not a body corporate. CFM35900 has more on CIS limited partnerships.

A ‘collective investment scheme’ means a collective investment scheme within the meaning of FSMA2000/S235. See also the Financial Services and Markets Act 2000 (Collective Investment Schemes) Order 2001 (S.I. 2001/1062) as amended for arrangements which do not amount to a collective investment scheme.

‘Non-qualifying territory’ has the meaning given by TIOPA2010/S173.

‘Resident’ has the meaning given by TIOPA2010/S167(5).

‘Small or medium-sized enterprise’ has the meaning given by TIOPA2010/S172. See INTM432112 for further guidance.