3(1)An amount of a loan is “outstanding” for the purposes of [F1paragraphs 1 and 1A] if the relevant principal amount exceeds the repayment amount.U.K.
(2)In sub-paragraph (1) “relevant principal amount”, in relation to a loan, means the total of—
(a)the initial principal amount lent, and
(b)any sums that have become principal under the loan, otherwise than by capitalisation of interest.
(3)In sub-paragraph (1) “repayment amount”, in relation to a loan, means the total of—
(a)the amount of principal under the loan that has been repaid before 17 March 2016, and
(b)payments in money made by the relevant person on or after 17 March 2016 by way of repayment of principal under the loan.
Textual Amendments
F1Words in Sch. 11 para. 3(1) substituted (22.7.2020) by Finance Act 2020 (c. 14), Sch. 2 para. 28
4(1)A payment is to be disregarded for the purposes of paragraph 3(3)(b) if—U.K.
(a)there is any connection (direct or indirect) between the payment and a tax avoidance arrangement (other than the arrangement under which the loan was made), or
(b)the payment, or a sum or asset directly or indirectly representing the payment, 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, but
(ii)before the end of [F25 April 2019].
(2)But a payment is not to be disregarded under sub-paragraph (1)(b) if, by the end of [F35 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.
F4(4). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(5)Sub-paragraph (6) applies if a payment is disregarded under sub-paragraph (1)(b).
(6)The value of [F5a relevant step treated as taken by paragraph 1 or 1A] 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.
Textual Amendments
F2Words in Sch. 11 para. 4(1)(b)(ii) substituted (22.7.2020) by Finance Act 2020 (c. 14), Sch. 2 para. 5(2)
F3Words in Sch. 11 para. 4(2) substituted (22.7.2020) by Finance Act 2020 (c. 14), Sch. 2 para. 5(3)
F4Sch. 11 para. 4(4) omitted (22.7.2020) by virtue of Finance Act 2020 (c. 14), Sch. 2 para. 5(4)
F5Words in Sch. 11 para. 4(6) substituted (22.7.2020) by Finance Act 2020 (c. 14), Sch. 2 para. 29
5(1)This paragraph applies where—U.K.
(a)a person (“P”) has made a loan to a relevant person,
(b)the loan was made on or after [F69 December 2010], and
(c)before the end of 5 April 2019, A or B acquires (whether or not for consideration) a right to payment of the whole or part of the loan.
(2)The amount of the loan in respect of which A or B acquires a right to payment is to be treated—
(a)for the purposes of paragraph 1(1) as an amount, of the loan made by P to the relevant person, that is outstanding immediately before the end of 5 April 2019;
(b)for the purposes of [F7paragraphs 1(4) and 1A(5)] and section 554Z3(1) of ITEPA 2003, as an amount of the loan that is outstanding at the time P is treated as taking the relevant step under paragraph 1(1).
(3)Where a quasi-loan or a loan made by P to a relevant person is replaced, directly or indirectly, by a loan or another loan (the “replacement loan”), references in sub-paragraphs (1) and (2) to the loan are references to the replacement loan.
Textual Amendments
F6Words in Sch. 11 para. 5(1)(b) substituted (22.7.2020) by Finance Act 2020 (c. 14), Sch. 2 para. 6
F7Words in Sch. 11 para. 5(2)(b) substituted (22.7.2020) by Finance Act 2020 (c. 14), Sch. 2 para. 30