Chapter 5CLoan or credit transactions

809CZALoan or credit transaction defined

1

This section defines a loan or credit transaction for the purposes of sections 809CZB and 809CZC.

2

A transaction is a loan or credit transaction if it is—

a

effected with reference to the lending of money or the varying of the terms on which money is lent, or

b

effected with a view to enabling or facilitating an arrangement concerning the lending of money or the varying of the terms on which money is lent.

3

A transaction is a loan or credit transaction if it is—

a

effected with reference to the giving of credit or the varying of the terms on which credit is given, or

b

effected with a view to enabling or facilitating an arrangement concerning the giving of credit or the varying of the terms on which credit is given.

4

Subsection (2) has effect whether the transaction is effected—

a

between the lender and borrower,

b

between either of them and a person connected with the other, or

c

between a person connected with one and a person connected with the other.

5

Subsection (3) has effect whether the transaction is effected—

a

between the creditor and debtor,

b

between either of them and a person connected with the other, or

c

between a person connected with one and a person connected with the other.

809CZBCertain payments treated as yearly interest

1

This section applies if a loan or credit transaction provides for a payment which is not interest but is—

a

an annuity or other annual payment falling within Part 5 of ITTOIA 2005 and chargeable to income tax otherwise than as relevant foreign income, or

b

an annuity or other annual payment which is from a source in the United Kingdom and chargeable to corporation tax under Chapter 5 of Part 10 of CTA 2009 (distributions from unauthorised unit trusts) or Chapter 7 of that Part (annual payments not otherwise charged).

2

The payment must be treated for the purposes of the Income Tax Acts as if it were a payment of yearly interest (see, in particular, section 874).

809CZCTax charged on income transferred

1

This section applies if—

a

under a loan or credit transaction a person transfers income arising from property,

b

the person is not, as a result of Chapter 5B (finance arrangements), chargeable to income tax on the income transferred, and

c

the person is within the charge to income tax.

2

In such a case—

a

income tax is charged under this section,

b

the tax is charged on an amount equal to the full amount of the income transferred,

c

the tax is charged for the tax year in which the transfer takes place, and

d

the person who transfers the income is liable for the tax.

3

This section does not prejudice the liability of any other person to tax.

4

For the purposes of this section a person transfers income if the person surrenders, waives or forgoes it.

5

Subsection (6) applies for the purposes of this section if—

a

credit is given for the purchase price of property, and

b

the rights attaching to the property are such that the buyer's rights to income from the property are suspended or restricted during the life of the debt.

6

The buyer must be treated as surrendering income of an amount equal to the income the buyer in effect forgoes by obtaining the credit.

7

For the purposes of this section an amount of income payable subject to deduction of income tax must be taken as the amount before deduction of tax.