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loan relationship


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The Finance Act 1996 abolished the specific tax charge on interest received by a company and the relief for interest paid. Instead, a company is now subject to corporation tax on the aggregate of its loan relationships. A company is stated to have a loan relationship wherever that company stands in the position of creditor or debtor in respect of any money debt arising from a transaction for the lending of money (Finance Act 1996 s 81(1). Thus, discounts, exchange gains and losses, and increases or decreases in the value of government stock are all aggregated with interest received and paid in computing the sum on which corporation tax is charged.

Subjects: Law.


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