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The Loan Relationship Rules in Practice

2 Part Course  |  Identify possible adjustments to profit for loans and convertible debt

IFRS Accounting for Real Estate Training Course

A one-day course presented in two half-day live webinars

This course is a ‘must know’ for;
  • Tax professionals 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.
This course 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 treatments in many cases.

  • The course is highly practical and will include multiple examples to assist with understanding the rules
  • It is presented by an independent training professional and can be a completely independent look at the issues raised
  • The course will encourage participation and allow for all questions and clarifications to be considered
  • The course will always be completely current and relevant

  • Identify the source of the law to enable personal research
  • Understand the fundamental principles of the tax treatment of loan relationship ‘debits’ and ‘credits’
  • Spotting where GAAP has not been followed and making suitable adjustments
  • Identifying deemed loan relationships and their impact on the corporation tax computation
  • Understand when anti-avoidance rules operate and the adjustments this can lead to
  • Identify the adjustments needed where loans are made between connected companies
  • Understand and apply the tax treatment applying to convertible debt under both UK GAAP and IFRS

Part One

  • Definition of a loan relationship and money debt
    • Examples of what is and is not a monet debt
    • 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 this changes 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 with regards to a loan and how this impacts its treatment in the tax computation
    • Examples of trading and non-trading loan relationships
  • 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
  • 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 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
    • Example involving construction of a building
    • Example involving development of software for internal use
    • Example of 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 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 loans
    • 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
      • 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 participator make any difference?
  • Non-market loans 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 really interest for the purposes of the LR 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

The trainer is a UK Chartered Accountant and Chartered Tax Advisor winning the John Wood Medal in the November 1995 CIOT sitting for the best paper on business taxation. He was previously Director of Finance and Taxation Programmes at BPP Professional Education and has delivered IFRS, US GAAP, UK Tax and VAT to a multitude of organisations world-wide since 1992. He has particular experience in delivering bespoke IFRS and US GAAP training programmes to multi-nationals in the financial services, transport and energy sectors as well as delivering UK tax and VAT update programmes to accounting and law firms. The trainer is passionate about training and his enthusiasm ensures that the participants enjoy the learning experience whilst gaining knowledge through their engagement in the sessions and through encouraging them to ask questions and discuss practical issues they may have. He also provides consultancy services to companies and accounting firms, including provision of tax and VAT advice, reviewing accounting policy manuals and advising on accounting treatments of various transactions.

This course is designed to help attendees understand when companies might need to make adjustments in their corporation tax computations for the impact of the loan relationships rules. Delegates will understand the different situations in which adjustments can be required and see examples so that they will be able to apply the rules correctly. The importance of considering the impact of connected company loans will be emphasised as will assessing whether the accounts have been properly prepared in accordance with generally accepted accounting principles. Delegates will appreciate the various anti-avoidance rules that exist so that they can spot if they might be relevant 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 and explanations and good examples. Really useful discussions with other attendees.
  • Lecturer took time to explain the more complex areas in a helpful manner.
Number of places:
Part 1
Number of places:
Part 2

£895.00

Per participant per part
Discounts available for multiple place booking find out more
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