PART III

Income Tax, Corporation Tax and Capital Gains Tax
CHAPTER I

General

Variation of terms of repayment of certain loans
28
1
If relevant loan interest payable by a qualifying borrower—
a
is payable under a loan agreement requiring combined payments, and
b
is payable to a qualifying lender who, in accordance with subsection (5) below, is specified for the purposes of this section, and
c
is interest on a loan made before 1st April 1983, or if it is interest in respect of which the Board have notified an earlier date to the lender under paragraph 2(5) of Schedule 7 to this Act, before that earlier date,
then, subject to subsection (2) below, the terms of repayment of the loan are by virtue of this section varied in accordance with subsection (3) below.
2
Subsection (1) above does not apply to any combined payment unless—
a
the qualifying lender concerned has, in accordance with regulations, given notice to the qualifying borrower that this section is to apply to combined payments which the borrower is required to make under the loan agreement; and
b
the qualifying borrower has not, in accordance with regulations, given notice to the qualifying lender that he wishes to continue with combined payments which, allowing for any sums he is entitled to deduct by virtue of section 26 above, do not exceed the combined payments which he would have been required to make but for the provisions of that section.
3
Where subsection (1) above applies, the amount of any combined payment payable by the qualifying borrower concerned which includes a payment of relevant loan interest shall be determined by the lender so as to secure, so far as practicable.—
a
that the principal and interest are repaid over the period which is for the time being agreed between the lender and the borrower ; and
b
that, unless there is a change in that period or in the basic rate of income tax or in the rate of interest charged by the lender, the amount of each net payment due from the borrower to the lender will be of the same amount;
and for the purposes of paragraph (b) above a " net payment" means a payment which, so far as it is a payment of interest, consists of interest from which the sum provided for by section 26(1) above has been deducted.
4
Where the qualifying borrower gives a notice under subsection (2)(b) above, the amount of any combined payment payable by him which includes a payment of relevant loan interest and the period over which the principal and interest on the loan are to be repaid shall be determined by the lender so as to secure, so far as practicable, that, unless there is a change in the basic rate of income tax or in the rate of interest charged by the lender.—
a
the amount of each net payment, as defined in subsection (3) above, which is due from the borrower to the lender will be of the same amount; and
b
the amount of each such payment does not exceed what, apart from section 26 above, would have been the amount of the first combined payment payable by the borrower after the date referred to in subsection (1)(c) above, less tax at the basic rate for the year 1983-84 on so much of that combined payment as would have consisted of interest;
but nothing in this section or in the loan agreement shall prevent the borrower from making, at such time or times as he chooses, additional repayments of capital of any amount so as to secure that the principal and interest on the loan are repaid within a period which is not shorter than that referred to in subsection (3)(a) above.
5
A building society within the meaning of the Building Societies Act 1962 or the Building Societies Act (Northern Ireland) 1967 is by virtue of this subsection specified for the purposes of this section; and the Treasury may by order made by statutory instrument specify any other qualifying lender or class of qualifying lender for the purposes of this section.
6
The giving of a notice under paragraph (a) or paragraph (b) of subsection (2) above does not affect the right of the qualifying lender and the qualifying borrower to vary, by agreement, the terms on which interest or capital or both is to be repaid.
7
In this section—
- " loan agreement " means an agreement governing the terms of payment of interest and repayment of capital of a loan the interest on which is relevant loan interest;
- " combined payment" means one of a number of regular payments which are attributable in part to repayment of capital and in part to payment of interest; and
- " regulations " means regulations made by the Board under section 29 below;
and other expressions have the same meaning as in section 26 above.
1962 c. 37.
1967 c. 31 (N.I.).