Annex 1: Minor changes in the law Change 3: Small profits rate and marginal relief: relaxations in the test for being an associated company: sections 25 and 28 to 30 and Schedule 1(section 99 of CAA) Paragraph 3: Loan creditors
Under section 416(2) of ICTA a company controls another if it possesses such rights as would entitle it to the greater part of the assets of the other company. A loan creditor may have such rights.
So a loan creditormay technically control the borrowing company with the result that the two companies are associated. Furthermore, all borrowing companies controlled in this way by the lender are associated with each other.
By concession loans made between companies that are otherwise completely unconnected are ignored if the loan creditor is not a close company or is a “bona fide commercial loan creditor”. And there is a similar concession if unconnected companies are controlled by a common loan creditor.
Section 29 enacts this part of the concession.