Part 16

Factoring of income etc
Chapter 2

Finance arrangements

Type 1 arrangements

Certain tax consequences not to have effect
759
1
This section applies if a type 1 finance arrangement would have the relevant effect (ignoring this section).
2
The arrangement is not to have that effect.
3
The relevant effect is that—
a
an amount of income on which the borrower or a person connected with the borrower would otherwise have been charged to corporation tax is not so charged,
b
an amount which would otherwise have been brought into account in calculating for corporation tax purposes any income of the borrower or of a person connected with the borrower is not so brought into account, or
c
the borrower or a person connected with the borrower becomes entitled to an income deduction.
4
But if the borrower is a partnership the relevant effect is that—
a
an amount of income on which a member of the partnership would otherwise have been charged to corporation tax is not so charged,
b
an amount which would otherwise have been brought into account in calculating for corporation tax purposes any income of a member of the partnership is not so brought into account, or
c
a member of the partnership becomes entitled to an income deduction.
5
For the purposes of this section the borrower and the lender are not connected with one another.
6
An income deduction is—
a
a deduction in calculating income for corporation tax purposes, or
b
a deduction from total profits.
Pt. 16 Ch. 2 restricted by Finance Act 2004 (c. 12), s. 196G(2)(3) (as inserted (with effect in accordance with Sch. 13 para. 3 of the amending Act) by Finance Act 2012 (c. 14), Sch. 13 para. 1 (with Sch. 13 Pt. 2))
Pt. 16 Ch. 2 restricted by Finance Act 2004 (c. 12), s. 196I(5)(6) (as inserted (with effect in accordance with Sch. 13 para. 17 of the amending Act) by Finance Act 2012 (c. 14), Sch. 13 para. 15 (with Sch. 13 Pt. 4))