Finance Act, 1974

Relief to companies on loans applied in acquiring interest in other companies.

33.—(1) (a) In this section and sections 34 and 35—

“ordinary share capital” has the meaning assigned to it by section 323 of the Income Tax Act, 1967 ;

“control” has the meaning assigned to it by section 16 of the Finance (Miscellaneous Provisions) Act, 1968 ;

“material interest”, in relation to a company, means the beneficial ownership of, or the ability to control, directly or through the medium of a connected company or connected companies or by any other indirect means, more than 5 per cent, of the ordinary share capital of the company.

(b) For the purposes of this section and sections 34 and 35 a company shall be regarded as connected with another company if it would be so regarded for the purposes of section 16 of the Finance (Miscellaneous Provisions) Act, 1968 , and if it is such a company as is referred to in subsection (2) (a).

(2) This section applies to a loan to a company (referred to subsequently in this section and in section 35 (1) as the investing company) to defray money applied—

(a) in acquiring any part of the ordinary share capital of—

(i) a company which exists wholly or mainly for the purpose of carrying on a trade or trades or a company whose income consists wholly or mainly of profits or gains chargeable under Case V of Schedule D, or

(ii) a company whose business consists wholly or mainly of the holding of stocks, shares or securities of such a company as is referred to in subparagraph (i), or

(b) in lending to such a company as is referred to in paragraph (a) money which is used wholly and exclusively for the purposes of the trade or business of the company or of a connected company, or

(c) in paying off another loan where relief could have been obtained under this section for interest on that other loan if it had not been paid off (on the assumption, if the loan was free of interest, that it carried interest).

(3) Relief shall be given in respect of any payment of the interest by the investing company on the loan—

(a) if when the interest is paid the investing company has a material interest in the company or in a connected company, and

(b) if, during the period taken as a whole from the application of the proceeds of the loan until the interest was paid, at least one director of the investing company was also a director of the company or of a connected company, and

(c) if the investing company shows that in the period aforesaid it has not recovered any capital from the company or from a connected company apart from any amount taken into account under section 35.