Loan relationships: New rules for connected companies
New guidance has been published relating to late payments of interest between connected companies. The guidance expands on what is included in the Finance Bill 2009. The guidance is divided into three sections and applies for accounting periods beginning on or after 1 April 2009.
- Connected persons and late interest. This section introduces the new rules and defines ‘resident’ and ‘non-qualifying’ for the purposes of the late interest rules.
- Transition to the new rules. This section includes details of how corporate groups can re-arrange inter-company loans using an election to use the “paid basis”. Elections can be made for accounting periods ending on or before 31 March 2011.
- Multi-investor partnerships. This final section explains how the rules will apply to situations where a UK company receives funding from a multi-investor fund. In such situations it may be difficult for the UK company to decide whether the late interest rules apply.