Part 13Tax avoidance

Chapter 5BFinance arrangements

F1Type 2 arrangements

809BZIDeemed interest

(1)

This section applies if—

(a)

there is a type 2 finance arrangement,

(b)

the transferor is a person within the charge to income tax, and

(c)

in accordance with generally accepted accounting practice the partnership's accounts record an amount as a finance charge in respect of the advance.

(2)

For income tax purposes the transferor may treat the amount as interest payable by the transferor on a loan.

(3)

The reference in subsection (1) to the partnership's accounts includes a reference to the transferor's accounts.

(4)

If an amount is treated as interest (“deemed interest”) under subsection (2), to find out when it is paid—

(a)

treat the payments mentioned in section 809BZF(2)(e) as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance,

(b)

treat the interest elements of the payments as paid when the payments are paid, and

(c)

treat the deemed interest as paid at the times when the interest elements are treated as paid.