UK-UK interest free loan and transfer pricing

If UK parent funds the set up of its UK sub and there is a large intercompany balance with no interest applied then one would expect there to be an imputation of interest ( where SME thresholds exceeded ) for transfer pricing on the parent as lender and the sub can claim a compensating adjustment.

However what is the position if an arms length lender would not have advanced the monies/met bills for the sub. treating the sub. as a stand alone company and start up? s1A(2) sch 28AA ICTA states that account be taken of the question of whether the loan would have been made at all and the amount of the loan if it were a 3rd party. Does this mean that there would be no imputation of interest on the parent company as lender ?

If so how does this reconcile with HMRC manuals INTM503010 http://www.hmrc.gov.uk/manuals/intmanual/INTM503010.htm

Here it refers to a loan performing an equity function and that if agreed imputation of interest is correct that the parent company loan should not be repaid in a later period. if part of the loan were deemed equity and part not then presumably there will be imputation of interest on part of the loan and the remainder of the loan HMRC would say should not be repaid.

How does this work in practice given it is UK to UK ? Both parent and sub. are likely to commercially regard the loan in their accounts and potentially repayable at some point if the sub, is successful. If so should there be a transfer pricing adjustment in the tax returns for imputation of interest on the parent based on the full amount of the loan even although the sub could not have borrowed the funds from a 3rd party ?

If both parent and sub are loss making then any compensating TP adjustment in sub. may simply become a LR deficit to carry forward which may not obtain relief for a number of years given it is start up. The parent however may be profitable in next couple of years and will be taxed on any TP imputation so no fiscal group neutrality for the year in question.

Anyone with experience of above TP adjustment to be made and HMRC ?