Chapter 5C: Loan or credit transactions
Overview
1174.This Chapter is based on section 786 of ICTA. It corresponds to Chapter 3 of Part 16 of CTA 2010, which makes similar provision for corporation tax. It deals with certain loan or credit transactions.
Section 809CZA: Loan or credit transaction defined
1175.This section defines “loan or credit transaction” for the purposes of sections 809CZB and 809CZC. It is based on section 786(1) and (2) of ICTA.
1176.What is now section 786 of ICTA originally appeared as paragraph 12 of Schedule 13 to FA 1969. It is aimed at artificial arrangements for dressing up payments of interest in another form – for example, arrangements whereby X grants Y an interest-free loan and:
Y grants X an annuity while the loan is outstanding; or
Y transfers income-bearing assets to X on the understanding that X will return them when the loan is paid off.
1177.Subsection (1) states the scope of the definition.
1178.Subsections (2) and (3) focus on, respectively, the lending of money and the giving of credit.
1179.Subsections (4) and (5) supplement subsections (2) and (3) respectively.
Section 809CZB: Certain payments treated as yearly interest
1180.This section deems annual payments under loan or credit transactions to be yearly interest. It is based on section 786(3) and (3A) of ICTA.
Section 809CZC: Tax charged on income transferred
1181.This section imposes a charge to income tax in certain cases in which, under a loan or credit transaction, a person transfers income arising from property without a sale or transfer of the property. It is based on section 786(5) to (7) of ICTA.
1182.Subsection (1) states when this section applies.
1183.Subsection (2) imposes the charge to income tax, quantifies the amount taxable, and specifies the person liable.
1184.Subsections (3) to (7) are supplementary.