IFM06540 - Tax elected funds (TEFs): breaches of conditions: breach of the loan creditor condition

Breach of the loan creditor condition

If a TEF breaches the loan creditor condition (see IFM06150) then the manager of the fund should notify HMRC – see IFM06520.

General consequences of such a breach

If HMRC is content that the breach was inadvertent and the fund rectifies the breach within 28 days of the fund becoming aware of the breach, then the TEF can continue to remain in the regime under regulation 69Z67(2) of SI2006/964 unless there is a multiple breach of the same condition (IFM06520) or a multiple breach of separate conditions (IFM06550).

If the breach is inadvertent but that the breach has not been rectified within 28 days or there have been two or more breaches of the same condition in regulation 69Z47 (see IFM06150) in a 10 year period beginning on the first day of the accounting period that the fund became aware of the first of the breaches, then under regulation 69Z67(3)&(4) a termination notice will be issued by HMRC. See IFM06610 for further information on termination notices.