VCM25140 - EIS: income tax relief: connection with the company: loan capital

ICTA/S291B (7); ITA/S170 (8)

The loan capital of a company or any subsidiary is treated for the purpose of ICTA/ S291B and ITA/S170(8) as including any debt incurred by the company for:

• any money borrowed or capital asset acquired by it,
• any right to receive income created in favour of it - for example, where a person contracts to make annual payments to the company in return for a capital sum due at some later date, that capital sum is loan capital,
• consideration the value of which to the company was (at the time the debt was incurred) substantially less than the amount of the debt (including any premium on the debt).

But loan capital is treated as excluding debts arising on a bank overdraft if the overdraft arose in the ordinary course of the bank's business. Where a claim is made that a bank overdraft did not arise in the ordinary course of a bank's business a report should be made to CT&VAT (Technical) before any relief is allowed.

Loan capital does not include normal hire purchase debts.