(1)Where an individual (" the lender ") allows another person (" the borrower ") the use of money or other property in any year, then, subject to the provisions of this section and section 116 below, the lender shall be treated as making a disposition as a result of which the value of his estate is reduced by the amount (if any) by which any consideration for the use falls short of the cost to him of allowing it (determined in accordance with section 116 below).
(2)The disposition under subsection(1) above shall be treated as made at the end of the year or, if earlier, at the time when the use comes to an end.
(3)Where the use of the property is allowed for a period specified in advance, or where in any other case the lender has no right to terminate the use immediately after it begins, subsection (1) above shall not apply in relation to use before the expiration of the specified period or, as the case may be, before the earliest time when the lender could terminate the use if he exercised his right to do so at the earliest opportunity.
(4)Subsection (1) above shall not apply in relation to any use of property allowed to the borrower at a time when it is mainly used by the lender or the lender's spouse.
(5)Subsection (1) above shall not apply in relation to the use of property for a period which is less than twelve months unless that period falls within a period of twenty-four months during which the lender allows the borrower the use of that property or similar property for periods which amount in aggregate to twelve months or more; and in calculating that aggregate no account shall be taken of—
(a)use to which, by virtue of subsection (3) or (4) above, subsection (1) does not apply, or
(b)use to which (apart from this subsection) subsection (1) above does apply, if the disposition under that subsection is not a transfer of value.
(6)Subsection (1) above shall not apply in relation to the use of property where the borrower is a body corporate if—
(a)it is not a close company; or
(b)not less than 90 per cent. in nominal value of its issued ordinary shares are shares to which the lender or his spouse is beneficially entitled ; or
(c)it is not an investment company and either—
(i)the lender or his spouse is a participator in the company or its holding company or has been such a participator at any time during the year or either of the two preceding years ; or
(ii)the lender's spouse died during the year or either of the two preceding years and was at any time during the three years ending with the year in which he died a participator in the company or its holding company.
(7)Subsection (1) above shall not apply in relation to the use of property where the borrower is a firm if—
(a)the lender or his spouse is a partner or has been a partner at any time during the year or either of the two preceding years; or
(b)the lender's spouse died during the year or either of the two preceding years and was a partner at any time during the three years ending with the year in which he died.
(8)Subsection (1) above shall not apply in relation to a loan in respect of which any person is chargeable to income tax under Schedule E by virtue of section 66(1) above.
(9)For the purposes of this section an individual who makes a revocable gift of any property to another person shall, so long as the gift continues revocable, be taken to allow him the use of that property.
(10)In this section—
" close company " and " participator " have the same meanings as in section 39 of the [1975 c. 7.] Finance Act 1975 ;
" firm " has the same meaning as in the [1890 c. 39.] Partnership Act 1890;
" holding company " has the same meaning as in section 154 of the [1948 c. 38.] Companies Act 1948 ;
" investment company " means a company falling within paragraph (a) of paragraph 16(3) of Schedule 4 to the Finance Act 1975 and not falling also within paragraph (b) or (c) of that paragraph ;
" ordinary shares " has the same meaning as in paragraph 13 of that Schedule ;
" year " means period of twelve months beginning with 6th April.
(11)This section has effect, in place of section 41 of the Finance Act 1975, in relation to the year beginning 6th April 1976 and subsequent years.
(1)The cost to the lender of allowing the use of money or land shall be taken to be equal to the consideration which might be expected in a transaction on the same terms as those on which the use is allowed (apart from terms as to consideration) made at arm's length between persons not connected with each other.
(2)The cost to the lender of allowing the use of property other than money or land shall be taken to be equal to the aggregate of—
(a)the annual value of the use of the property or, if the use does not continue throughout the year, a proportionate part of that annual value, and
(b)any expense incurred by the lender in connection with property during the year or, if the use does not continue throughout the year, a proportionate part of that expense, but excluding expense incurred in the acquisition or production of the property and excluding any hire charges;
except that if the property is hired by the lender and the annual amount of the hire charges is greater than the annual value of the use of the property, paragraph (a) above shall have effect as if it referred to that annual amount instead of to that annual value.
(3)If the property is money or land, the amount arrived at under section 115(1) above shall be reduced by the income tax which would be chargeable in respect of that amount (after taking account in the case of land of any deductions which might be made for the purposes of Schedule A) if it were the highest part of the lender's total income ; and in calculating that income there shall be disregarded any such sum as is mentioned in paragraphs (a) to (c) of section 529 of the Taxes Act.
(1)Schedule 6 to the [1975 c. 7.] Finance Act 1975 shall apply with the following modifications to—
(a)any transfer of value which is a disposition under section 115 above, and
(b)any other transfer of value, whether made before or after the passing of this Act, if or to the extent that it is a disposition whereby the use of money or other property is allowed by one person (" the lender") to another (" the borrower ").
(2)For the purposes of paragraph 1 (transfers between spouses) the borrower's estate shall be treated as increased by an amount equal to the value transferred.
(3)For the purposes of paragraphs 4 (small gifts) and 6 (gifts in consideration of marriage) the transfer of value shall be treated as made by outright gift.
(4)Paragraph 5(1) (normal expenditure out of income) shall apply as if for the conditions stated in paragraphs (a) and (b) there were substituted the condition that the transfer was a normal one on the part of the transferor.
(5)Paragraphs 10 and 11 (gifts to charities and to political parties) shall apply without sub-paragraph (1)(b) (£100,000 limit for transfers within one year of death); and for the purposes of those paragraphs and paragraphs 12 and 13 (gifts for national purposes and for public benefit)—
(a)the value transferred shall be treated as attributable to the property of which the borrower is allowed the use, and
(b)that property shall be treated as given to, or as becoming the property of, the borrower unless the use allowed includes use for purposes other than charitable purposes or those of a body mentioned in paragraph 11, 12 or 13.
(6)Part II (exceptions) shall not apply.