Chapter CFM92060

Record NumberCFM92060
Published date16 April 2016
This guidance applies to worldwide group periods of account ending before or straddling 1 April 2017.
Section 321 (2) - fixed-term financing arrangements

TIOPA10/S321 (1) (b) provides that a finance arrangement is a short-term loan relationship if either of two conditions are met. The first condition is that the finance arrangement is a money debt or a loan relationship that is due (from the outset) to terminate within 12 months of starting and does not terminate in the period of account of the worldwide group under consideration - see TIOPA10/S321 (2). Guidance on the second condition is at CFM92070.

A loan relationship under CTA09/PT5 is defined by CTA09/S302 (1) as a money debt arising from the transaction of lending money. But a money debt that is not a loan relationship, such as a trade debt, can also be a ‘short-term loan relationship’ within section 321 - although many trade debts will not carry interest, and therefore cannot give rise to financing expense amounts or financing income amounts.

This first condition is concerned with fixed term finance arrangements. It allows for the situation where a fixed term arrangement of less than 12 months is due to terminate after the end of the period of account of the worldwide group - it can be treated as a short-term loan relationship from the outset.

Some examples are given below. They assume that the financing arrangements in question do not have a long-term funding purpose (see CFM92110).

Example 1


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