CFM6410 - Taxing loan relationships: money debts: discounts within loan relationships

Consequences

Where a company is party to a money debt that meets the conditions in S 100(1A) it is deemed to have a loan relationship but only in relation to the matters specified in S100(2ZA). These matters are:

• any discount arising to the company from the money debt
• any impairment (or reversal of impairment) arising to the company in respect of the discount.

S100 (3B) provides that where discount is brought into account for the purposes of S100 the deemed creditor loan relationship must be accounted for, for tax purposes, on an amortised cost basis of accounting. This ensures that the discount is brought into account over the life of the debt rather than deferred until it is realised.