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ITTOIA/S863G

This section looks at the situation where the Bank does not view the loan to the individual in isolation. In effect the Bank is prepared to grant a facility to the LLP and its members.

»Ê¹ÚÌåÓýapp TAAR will apply if the LLP has borrowed up to its facility limit and a condition of the loan to the individual member is that the contribution is used to repay a portion of the drawn facility so that the overall lending by the Bank is not increased.

»Ê¹ÚÌåÓýapp TAAR will apply if the firm has not yet borrowed up to the facility limit, but the firm’s facility limit is required to be reduced as a consequence of the loan to the individual.

Example

This example looks at where the loan to the member affects the loan available to the LLP.

R has been an employee of the FED LLP. She has reached that point in her career where she is offered membership.

In order to become a member, R needs to invest in the LLP. She has some capital of her own, and the LLP arranges with the Bank for her to have a normal commercial loan to cover the balance.

However, the Bank facility covers both the LLP and its members. »Ê¹ÚÌåÓýapp result of the loan to R is a reduction in the amount the LLP can borrow.

In these circumstances the TAAR is triggered as all that has happened is that a part of the loan facility of the LLP has been moved to the P.