Taxation (International and Other Provisions) Act 2010

7After section 809BZS insert—

“Chapter 5CLoan or credit transactions

809CZALoan or credit transaction defined

(1)This section defines a loan or credit transaction for the purposes of sections 809CZB and 809CZC.

(2)A transaction is a loan or credit transaction if it is—

(a)effected with reference to the lending of money or the varying of the terms on which money is lent, or

(b)effected with a view to enabling or facilitating an arrangement concerning the lending of money or the varying of the terms on which money is lent.

(3)A transaction is a loan or credit transaction if it is—

(a)effected with reference to the giving of credit or the varying of the terms on which credit is given, or

(b)effected with a view to enabling or facilitating an arrangement concerning the giving of credit or the varying of the terms on which credit is given.

(4)Subsection (2) has effect whether the transaction is effected—

(a)between the lender and borrower,

(b)between either of them and a person connected with the other, or

(c)between a person connected with one and a person connected with the other.

(5)Subsection (3) has effect whether the transaction is effected—

(a)between the creditor and debtor,

(b)between either of them and a person connected with the other, or

(c)between a person connected with one and a person connected with the other.

809CZBCertain payments treated as yearly interest

(1)This section applies if a loan or credit transaction provides for a payment which is not interest but is—

(a)an annuity or other annual payment falling within Part 5 of ITTOIA 2005 and chargeable to income tax otherwise than as relevant foreign income, or

(b)an annuity or other annual payment which is from a source in the United Kingdom and chargeable to corporation tax under Chapter 5 of Part 10 of CTA 2009 (distributions from unauthorised unit trusts) or Chapter 7 of that Part (annual payments not otherwise charged).

(2)The payment must be treated for the purposes of the Income Tax Acts as if it were a payment of yearly interest (see, in particular, section 874).

809CZCTax charged on income transferred

(1)This section applies if—

(a)under a loan or credit transaction a person transfers income arising from property,

(b)the person is not, as a result of Chapter 5B (finance arrangements), chargeable to income tax on the income transferred, and

(c)the person is within the charge to income tax.

(2)In such a case—

(a)income tax is charged under this section,

(b)the tax is charged on an amount equal to the full amount of the income transferred,

(c)the tax is charged for the tax year in which the transfer takes place, and

(d)the person who transfers the income is liable for the tax.

(3)This section does not prejudice the liability of any other person to tax.

(4)For the purposes of this section a person transfers income if the person surrenders, waives or forgoes it.

(5)Subsection (6) applies for the purposes of this section if—

(a)credit is given for the purchase price of property, and

(b)the rights attaching to the property are such that the buyer’s rights to income from the property are suspended or restricted during the life of the debt.

(6)The buyer must be treated as surrendering income of an amount equal to the income the buyer in effect forgoes by obtaining the credit.

(7)For the purposes of this section an amount of income payable subject to deduction of income tax must be taken as the amount before deduction of tax.”