Special rules apply if a company (A) is in a loan relationship with another company (B), and these companies are connected at any point during the accounting period. CTA 2009, s 348; CFM35010

Definition of 'connected'

A company is connected with another person for an accounting period if that person is a company and, at any time in that accounting period, one of the companies had control of the other or both were under the control of the same person. CTA 2009, s 466; CFM35030

For this purpose, control of a company means the power of a person to secure that the affairs of the company are conducted in accordance with his wishes:

  1. by means of holding shares or the possession of voting power (in the company or any other company), or
  2. by virtue of powers conferred by the articles of association or any other document

CTA 2009, s 472

Companies controlled by certain entities, eg the Crown, are not treated as connected with one another for this purpose. CTA 2009, s 466(3)

Use of amortised cost basis of accounting

Where the parties are connected, the only accounting basis that can be used is the amortised cost basis. CTA 2009, ss 348-349

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