The Loan Relationship Rules in Practice

Name: The Loan Relationship Rules in Practice
Availability: InStock

Learn how to identify possible adjustments to profit for loans and convertible debt

Two women discussing together and standing in front of glass window in a tall building

A one-day course presented over two-half days in a virtual class

Book Places Now

In-house pricing available – often more cost-effective for teams of 10+

Download: Course Outline

Part One

Definition of a Loan Relationship and Money Debt

Examples of what is and is not a money debt begins this loan relationship rules training
Examples of transactions that do not represent loan relationships
Deemed loan relationships – their importance for corporation tax and examples

Debt Securities Issued to Represent a Debt Owed to a Supplier

How does this change the corporation tax treatment? With examples

Types of Loan Relationship: Trading and Non-Trading (How to Determine Which is Which and Why the Distinction is Important)

Changes in intention concerning a loan and how this impacts its treatment in the tax computation
Examples of trading and non-trading loan relationships, credit and debit

Computational Aspects

Amounts brought into account and amounts recognised later or not at all
Consideration of items in P&L, other comprehensive income and shareholders’ funds
Examples of items that might be found in different parts of the financial statements are covered when assessing UK loan relationship rules

Dealing With Non-GAAP Accounting Treatments of Loans

Accounting materiality versus HMRC materiality
Deferred tax implications
Examples of non-UK GAAP treatment of loan issue costs

Dealing With Accounts Prepared Using Foreign GAAP

Adjustments that might be needed to comply with UK corporation tax law
Whether deferred tax is needed or not
Example of a UK branch using foreign GAAP in the accounts, which it prepares

Capitalised Interest and When it is Brought into Account for Tax Purposes

‘GAAP taxable’ assets – what they are and why it matters
Non-GAAP taxable assets – how interest capitalised into the cost is treated for corporation tax purposes
This loan relationship rules session covers examples:
- Involving the construction of a building
- Involving the development of software for internal use
- A development property intended to be sold

Perpetual Debt Issues

Accounting treatment – debt or equity?
Possible adjustments required where the accounting treatment might be to treat it like share capital

Connected Company Loan Relationship Issues

Definition of a connected company
Definition of amortised cost pre-and post-2016
Write off or release of debt and its implications for the lender and the borrower
Examples of connected company loans made in accounting periods beginning before 1 January 2016, and the possible tax adjustments required for both lender and borrower
Example of connected company loans made in accounting periods beginning on or after 1 January 2016 between UK companies

Connected Company Loan Release or Write-Off: Including Accrued Interest

Part Two

Late Paid Interest Rules

What they are and when they apply
Examples where the rules will and will not apply
Deferred tax implications

Impact of Transfer Pricing Rules on Connected Company Loan Write-Off

When transfer pricing adjustments might be needed for loan relationships
The impact on the corporation tax computation based on the figures in the financial statements
Examples involving different types of transfer pricing adjustments, such as
- Thin Capitalisation Rules
- Non-market rates of interest being charged

The ‘Unallowable Purposes’ Rule

What is an unallowable purpose?
What adjustments are needed if the rule applies
Examples of different scenarios where the unallowable purposes rule can apply
Recent case law decisions

Dealing with Non-Trading Loan Relationship Deficits

How the ‘loss’ can be relieved
Pre- and post-1 April 2017 deficits

Close Company Issues

Loans to participators
Treatment when the loan is forgiven or written off (for both the company and the participator)
Does being an employee or officer as well as a participant make any difference?

Non-Market Loan Anti-Avoidance Rules

Loans involving individuals or certain non-resident companies which are not at a market rate
Adjustments required
Examples of where the anti-avoidance rules operate
Examples of where the anti-avoidance rules do not operate

Notional Interest Expense and Income

Interest that isn’t interest for the UK loan relationship rules
Items to look out for in the P&L that do not fall under the LR rules
Examples of possible adjustments
- Pension costs
- Discounted provisions
- Others

Tax Issues Around Convertible Debt

Differences caused by using either FRS 102 or IFRS 9 for the accounting treatment
Bonds convertible to a fixed number of shares
Other situations involving convertible securities
Possible disallowance of interest on the bonds
Chargeable gains implications of redemption, conversion or cancellation
Examples of debt convertible into a fixed number of shares under UK GAAP and IFRS
Examples of debt convertible into a variable number of shares – the difference it can make, depending on which GAAP is used, concludes loan relationship rules training

The Loan Relationship Rules in Practice at Redcliffe Training is delivered by a Director of a consultancy company specialising in taxation, share scheme advice, reward and lecturing. He has developed a specialised share scheme service for small companies and advises FTSE companies on communication. Sessions cover most aspects of Direct Taxation with particular interest across employment taxation and transfer pricing. Both of which pose unusual conceptual challenges.

Before this, he worked for Henderson for nearly 9 years, leading the Share Schemes team for part of this time.

Delivering the UK loan relationship rules at Redcliffe, this specialist took the level 7 CIPD Master's qualification whilst at Henderson. Before Henderson, he was with Australia Mutual Provident (AMP) and helped set up one of the first Share Incentive Plans (SIP) for large companies in 2001. It was so unusual at the time that the Revenue phoned him up to find out how they could encourage more large companies to adopt SIP.

This professional began his career in taxation and, for the following 16 years, worked in three of the “Big Four” accountancy firms. This loan relationship rules training lead became a Senior Manager with Deloitte & Touche, having worked on issues such as profit-related pay, share schemes, expatriate tax, tax investigations, reward management, US taxation, transfer pricing and corporate tax.

The UK Loan Relationship Rules in Practice at Redcliffe Training identifies the source of the law to enable personal research.
Participants will understand the fundamental principles of the taxation of loan relationships ‘debits’ and ‘credits’.
Sessions spot where GAAP has not been followed, and making suitable adjustments.
Training identifies deemed loan relationships and their impact on the corporation tax computation.
We’ll cover when anti-avoidance rules operate and the adjustments this can lead to.
This course establishes the adjustments needed where loans are made between connected companies.
Participants will understand and apply the tax treatment applying to convertible debt under both UK GAAP and IFRS.

The UK loan Relationship Rules are a ‘must know’ for;

Tax professionals who are involved in the preparation or review of corporation tax computations, because loan relationships will feature in nearly every computation, and the rules are extensive and, in some cases, complex.

Training is a ‘nice to know’ for:

CFOs, FDs and FCs looking to get a greater understanding of how the tax treatment of a loan relationship can differ from its accounting treatment in many cases.

Sessions at Redcliffe Training help attendees understand when companies might need to adjust their corporation tax computations for the loan relationship rules. Delegates will understand the different situations in which adjustments can be required and see examples to apply the rules correctly.

The importance of considering the impact of connected company loans is emphasised. Sessions assess whether accounts have been properly prepared following generally accepted accounting principles. Delegates will appreciate the various anti-avoidance rules that exist so that they can determine whether they apply to transactions that have been undertaken by the company under review.

Excellent tutor - really takes the time to explain things carefully and take questions, etc., and the notes were really comprehensive.
Clear notes, explanations and good examples. Really useful discussions with other attendees.
The lecturer took time to explain the more complex areas in a helpful manner.
The trainer is an effective and entertaining presenter...there were a number of areas where the knowledge I learned can be used to better appreciate the impact on clients.

Request a fee quote for an exclusive in-house presentation of this course

Request a fee quote for a pre-recorded course
(min. 50 participants)