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This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.

Other exclusions from short-term loan relationships

Regulation 2 of The Corporation Tax (Exclusion from Short-Term Loan Relationships) Regulations 2009 (SI2009/3313) provide for a further category of finance arrangements to be excluded from being short-term loan relationships. This caters for funding arrangements that, if viewed in isolation, satisfy the tests in TIOPA10/S321, but from a wider perspective form part of the long-term funding of the debtor company. Regulation 2(a) refers to all or part of the finance arrangement being made for a ‘long-term funding purpose�.

Regulation 3 defines what is meant by ‘long-term funding purpose�. A particular company may have an identifiable need for funds, which is likely to persist over a period of time. The group may put arrangements in place to meet that funding need. It is also possible that funding arrangements may be driven from the creditor’s side - a particular company or companies has a surplus of cash for which it needs to find a home, either in the short-term or for a longer period.

In either case, regulation 3 looks broadly at whether, notwithstanding the terms of any particular loan relationship or money debt, it is ‘reasonable to assume� that the funding arrangements of which the loan or debt forms part will be in place for more 12 months.

A finance arrangement is made for a long-term funding purpose if either of two conditions is met. One of these conditions relates to an anti-avoidance rule at regulation 4. This is discussed further at CFM92140.

The other condition is that

• it is reasonable to expect that money debt created under the finance arrangement will not be settled within 12 months, and
• it is reasonable to expect that loan relationships created under the arrangement will not terminate within 12 months of it coming into force.

However, regulation 3(2) makes it clear that a finance arrangement is not necessarily settled or terminated when an individual money debt or loan is repaid. It covers two particular circumstances:

• where the repayment is only likely to be achieved by further borrowing, and
• where the finance arrangement is settled or terminated temporarily by funds available for a limited time.

These circumstances represent particular cases where it is ‘reasonable to expect� that finance arrangements will last more than a year. They do not detract from the generality of regulation 3(1).

CFM92120 gives examples of cases where it might be reasonable to expect that the funding purpose is long-term, and CFM92130 gives examples of short-term funding purposes.