Finance (No. 2) Act 2017

Meaning of “outstanding”: quasi-loans

12 (1) A payment or transfer is to be disregarded for the purposes of paragraph 11(4)(b) or (c) if—

(a) there is any connection (direct or indirect) between the payment or transfer and a tax avoidance arrangement (other than the arrangement under which the quasi-loan was made), or

(b) the payment or the asset transferred, or a sum or asset directly or indirectly representing the payment or asset, is the subject of a relevant step (as defined in section 554A(2) of ITEPA 2003) that is taken—

(i) after the payment is made or the asset transferred, but

(ii) before the end of 5 April 2019.

(2) But a payment or transfer is not to be disregarded under sub-paragraph (1)(b) if, by the end of 5 April 2019, each relevant tax liability has been paid in full.

(3) For the purposes of this paragraph, each of the following is a “relevant tax liability”—

(a) any liability for income tax arising by virtue of the application of Chapter 2 by reason of the relevant step mentioned in sub-paragraph (1)(b), and

(b) where section 554Z6 of ITEPA 2003 (overlap with certain earnings) applies because that relevant step gives rise to relevant earnings for the purposes of that section, any liability for income tax in respect of those relevant earnings.

(4) Sub-paragraph (5) applies if a payment is disregarded under sub-paragraph (1)(b).

(5) The value of the relevant step treated as taken by paragraph 1 is not reduced under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject to earlier tax liability) by the amount of the sum, or the value of the asset, which is the subject of the relevant step mentioned in sub-paragraph (1)(b) unless the payment condition is met by reason of section 554Z5(4)(a) and (b)(ii) being met.