CFM6401 - Taxing loan relationships: money debts: overview

Overview

FA96/S100 treats amounts of interest and exchange gains and losses on money debts which are not themselves loan relationships (because not arising from lending transaction) as within the scope of Chapter 2 Part 4 FA 1996. It brings such amounts into account by deeming the money debts on which the amounts arise to be loan relationships. In addition impairment losses on trade debts were brought within S100 for accounting periods beginning after 31 December 2004. The main guidance on S100 is at CFM5055.

Prior to Finance (No. 2) Act 2005, other amounts arising on money debts were not within the scope of S100. Disclosures under Part 7 FA 2004 indicated that a number of avoidance schemes had been devised to exploit the limited scope of S100 by generating interest-like returns on money debts . Finance (No.2) Act 2005 consequently extended the scope of S100 to include a wider range of profit on money debts.

The guidance at CFM6405 describes the new rules for charging discounts on money debts. CFM6425 gives the rules for taxing profits from related transactions in respect of money debts. Both provisions have effect from 16 March 2005.

Other types of scheme which generate an interest-like return by the use of shares have been closed by the introduction of S 91A and S91B FA96 CFM6322.