354 Loans: no claim after disposal or excessive repayments or receipts of value
(1) If the investment consists of a loan, no claim may be made in respect of a tax year if—
(a) the investor disposes of the whole or any part of the loan before the qualifying date relating to that year,
(b) at any time after the investment is made but before that qualifying date, the amount of the capital outstanding on the loan is reduced to nil, or
(c) before that qualifying date, paragraphs (a) and (b) of section 362(1) (repayments of loan in 5 year period exceeding permitted limits) apply in relation to the investment (whether by virtue of section 363 (receipts of value treated as repayments) or otherwise).
(2) For the purposes of subsection (1)(a) any repayment of the loan is to be ignored.
(3) For the purposes of this section the qualifying date relating to a tax year is the next anniversary of the investment date to occur after the end of that year.
355 Securities or shares: no claim after disposal or excessive receipts of value
(1) If the investment consists of securities or shares, a claim made in respect of a tax year must relate only to those securities or shares held by the investor, as sole beneficial owner, continuously throughout the period—
(a) beginning when the investment is made, and
(b) ending immediately before the qualifying date relating to the tax year.
(2) No claim for CITR may be made in relation to a tax year if before the qualifying date relating to that year paragraphs (a) to (d) of section 364(1) (receipts of value in the 6 year period exceeding permitted limits) apply in relation to the investment or any part of it.
(3) For the purposes of this section the qualifying date relating to a tax year is the next anniversary of the investment date to occur after the end of that year.
356 No claim after loss of accreditation by the CDFI
(1) If the CDFI ceases to be accredited under Chapter 2 with effect from a time... within the 5 year period, no claim for CITR relating to the investment may be made by the investor—
(a) for the relevant tax year, or
(b) for any later tax year.
(2) To find the relevant tax year proceed under the rest of this section, in which references to the time of accreditation ceasing are to the time with effect from which the CDFI ceases to be accredited.
(3) If the time of accreditation ceasing falls within the first year of the 5 year period, the relevant tax year is the year in which the investment date fell.
(4) In any other case the relevant tax year is—
(a) the year in which fell the last anniversary of the investment date before the time of accreditation ceasing, or
(b) if the time of accreditation ceasing itself falls on an anniversary of the investment date, the year in which that anniversary falls.
(1) In this Part references to the CITR attributable to any loan, securities or shares in respect of a tax year are read as references to the reduction which—
(a) is made in the investor's liability to income tax for that year, and
(b) is attributed to that loan, or those securities or shares, in accordance with this section and section 358.
This is subject to the provisions of Chapter 6 for the withdrawal or reduction of CITR.
(2) Subsections (3) and (4) apply if the investor's liability to income tax is reduced for a tax year under this Part.
(3) If the reduction is obtained because of one loan, or securities or shares included in one issue, the amount of the tax reduction is attributed to that loan or those securities or shares.
(4) If the reduction is obtained because of a loan or loans, securities or shares included in two or more investments, the reduction—
(a) is apportioned between the loan or loans, securities or shares in each of those investments in the same proportions as the invested amounts in respect of the loan or loans, securities or shares for the year, and
(b) is attributed to that loan or those loans, securities or shares accordingly.
(4A) In the case of CITR under section 335A, in subsection (4)(a) the reference to the year is to be read as a reference to the year mentioned in section 335A(1)(a).
(5) If under this section an amount of any reduction of income tax is attributed to any securities in the same issue, a proportionate part of that amount is attributed to each security.
(6) If under this section an amount of any reduction of income tax is attributed to any shares in the same issue, a proportionate part of that amount is attributed to each of those shares.
(7) If CITR attributable to a loan or any securities or shares falls to be withdrawn under Chapter 6, the CITR attributable to that loan or each of those securities or shares is reduced to nil.
(8) If CITR attributable to any securities or shares falls to be reduced under that Chapter by any amount, the CITR attributable to each of those securities or shares is reduced by a proportionate part of that amount.
(1) This section applies if—
(a) corresponding bonus shares are issued to the investor in respect of any shares (“the original shares”) included in the investment, and
(b) the original shares have been continuously held by the investor, as sole beneficial owner, from the time they were issued until the issue of the bonus shares.
(2) A proportionate part of any amount attributed to the original shares, in respect of a tax year, immediately before the bonus shares are issued is attributed to each of the shares in the holding consisting of the original shares and the bonus shares, in respect of that year.
(3) After the issue of the bonus shares this Part applies as if—
(a) the original issue had included the bonus shares, and
(b) the bonus shares had been held by the investor, as sole beneficial owner, continuously from the time the original shares were issued until the bonus shares were issued.
(4) In this section—
“corresponding bonus shares” means bonus shares that are in the same company, are of the same class, and carry the same rights as the original shares,
“original issue” means the issue of shares forming the investment.
(1) This Chapter provides for CITR to be withdrawn or reduced under—
(a) section 360 (disposal of loan during 5 year period),
(b) section 361 (disposal of securities or shares during 5 year period),
(c) section 362 (repayment of loan capital during 5 year period),
(d) section 363 (value received by investor during 6 year period: loans),
(e) section 364 (value received by investor during 6 year period: securities or shares),
(f) section 371 (CITR subsequently found not to have been due).
(2) This Chapter also provides for the manner in which CITR is to be withdrawn or reduced (see section 372).
(3) In this Chapter “the 6 year period” in relation to the investment is the period of 6 years beginning 12 months before the investment date.
(1) If the investment consists of a loan and within the 5 year period—
(a) the investor disposes of the whole of the investment, otherwise than by way of a permitted disposal, or
(b) the investor disposes of a part of the investment,
any CITR attributable to the investment in respect of any tax year must be withdrawn.
(2) For the purposes of this section—
(a) a disposal is “permitted” if—
(i) it is by way of a distribution in the course of dissolving or winding up the CDFI,
(ii) it is a disposal within section 24(1) of TCGA 1992 (entire loss, destruction, dissipation or extinction of asset),
(iii) it is a deemed disposal under section 24(2) of that Act (claim that value of asset has become negligible), or
(iv) it is made after the CDFI has ceased to be accredited under this Part, and
(b) a full or partial repayment of the loan is not treated as giving rise to a disposal.
361 Disposal of securities or shares during 5 year period
(1) This section applies if the investment consists of securities or shares and—
(a) the investor disposes of the whole or any part of the investment (“the former investment”) within the 5 year period,
(b) the CDFI has not ceased to be accredited before the disposal, and
(c) the disposal does not arise as a result of an event within section 366(1)(a) (repayment, redemption or repurchase of securities or shares included in the investment).
(2) If the disposal is not a qualifying disposal, any CITR attributable to the former investment in respect of any tax year must be withdrawn.
(3) Subsections (3A) to (3H) apply if—
(a) the disposal is a qualifying disposal, and
(b) the investor has made a claim under section 335 in respect of the former investment for a tax year (“tax year X”).
(3A) Subsection (3B) applies if the total of the following CITR does not exceed A—
(a) any CITR attributable to the former investment in respect of tax year X given under section 335, and
(b) any CITR attributable to the former investment in respect of later tax years given under section 335A where tax year X is the tax year mentioned in section 335A(1)(a).
(3B) All CITR falling within subsection (3A)(a) or (b) must be withdrawn.
(3C) If the total of the CITR falling within subsection (3A)(a) or (b) exceeds A, that total must be reduced by A.
(3D) For the purposes of subsection (3C) CITR given in a later tax year must be reduced before CITR given in an earlier tax year.
(3E) For the purposes of subsections (3A) and (3C) “A” is an amount equal to 5% of the amount or value of the consideration (if any) which the investor receives for the former investment.
(3F) If—
(a) the total of the CITR falling within subsection (3A)(a) or (b)(“B”) is less than
(b) the amount (“C”) which is equal to 5% of the invested amount in respect of the former investment for tax year X,
“A” is to be reduced by multiplying it by the fraction—
B C
(3G) If the amount of CITR attributable to the former investment in respect of a tax year has been reduced before the CITR is obtained, the amount referred to in subsection (3F) as B is to be treated for the purposes of that subsection as the amount it would have been without the reduction.
(3H) Subsection (3G) does not apply to a reduction by virtue of section 358 (attribution: bonus shares).
(4) For the purposes of this section “qualifying disposal” means a disposal that is—
(a) by way of a bargain made at arm's length, or
(b) a permitted disposal (within the meaning of section 360).
(5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
362 Repayment of loan capital during 5 year period
(1) If the investment consists of a loan and—
(a) the average capital balance of the loan for the third, fourth or final year of the 5 year period is less than the permitted balance for the year in question, and
(b) the difference between those balances is not an amount of insignificant value,
any CITR attributable to the investment in respect of any tax year must be withdrawn.
(2) For the purposes of this section—
“the average capital balance” of the loan for a period is the mean of the daily balances of capital outstanding during that period, ignoring any non-standard repayments of the loan made in that period or at any earlier time, and
“the permitted balance” of the loan is—
for the third year of the 5 year period, 75% of the average capital balance for the period of 6 months beginning 18 months after the investment date,
for the fourth year of that period, 50% of that balance, and
for the final year of that period, 25% of that balance.
(3) For the purposes of subsection (2) a repayment of the loan is a non-standard repayment if subsection (4) or (5) applies.
(4) This subsection applies if the repayment is made at the choice or discretion of the CDFI, and not as a direct or indirect consequence of any obligation provided for under the terms of the loan agreement.
(5) This subsection applies if the repayment is made as a result of the failure of the CDFI to meet any obligation of the loan agreement which—
(a) is imposed merely because of the commercial risks to which the investor is exposed as lender under that agreement, and
(b) is no more likely to be breached than any obligation that might reasonably have been agreed in respect of the loan in the absence of this Part.
(6) For the purposes of this section “an amount of insignificant value” means an amount which—
(a) is not more than £1,000, or
(b) if it is more than £1,000, is insignificant in relation to the average capital balance of the loan for the year of the 5 year period in question.
363 Value received by investor during 6 year period: loans
(1) This section applies if the investment consists of a loan and the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period.
(2) The investor is treated for the purposes of—
(a) section 337 (determination of “invested amount”), and
(b) section 362 (repayments of loan capital),
as having received a repayment of the loan of an amount equal to the amount of the value received.
(3) For those purposes the repayment is treated as made—
(a) if the value is received in the first or second year of the 6 year period, at the beginning of that second year, and
(b) if the value is received in a later year of that period, at the beginning of the year in question.
(4) For the purposes of section 362 the repayment is treated as a repayment other than a non-standard repayment (within the meaning of that section).
(5) For the purposes of this section “an amount of insignificant value” means an amount of value which—
(a) is not more than £1,000, or
(b) if it is more than £1,000, is insignificant in relation to the average capital balance of the loan for the year of the 6 year period in which the value is received.
(6) For the purposes of subsection (5)(b)—
(a) “the average capital balance” of the loan for a year is the mean of the daily balances of capital outstanding during the year (ignoring the receipt of value in question), and
(b) any value received in the first year of the 6 year period is treated as received at the beginning of the second year of that period.
(7) This section is subject to section 368 (value received if there is more than one investment).
(8) Value received is ignored, for the purposes of this section, so far as the CITR attributable to any loan, securities or shares in respect of any one or more tax years has already been reduced or withdrawn on its account.
364 Value received by investor during 6 year period: securities or shares
(1) This section applies if the investment consists of securities or shares and—
(a) the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period,
(b) the investment or a part of it is held by the investor at the time the value is received and has been held by the investor, as sole beneficial owner, continuously since the investment was made (“the continuing investment”),
(c) the receipt is wholly or partly in excess of the permitted level of receipts in respect of the continuing investment, and
(d) the amount of that excess ... is not an amount of insignificant value.
(2) Any CITR attributable to the continuing investment in respect of any tax year must be withdrawn.
(3) For the purposes of subsection (1) the permitted level of receipts is exceeded if—
(a) any amount of value is received by the investor (ignoring any amounts of insignificant value) in the first 3 years of the 6 year period, or
(b) the total amount of value received by the investor (ignoring any amounts of insignificant value)—
(i) before the beginning of the fifth year of that period, exceeds 25% of the invested capital,
(ii) before the beginning of the final year of that period, exceeds 50% of the invested capital, or
(iii) before the end of that period, exceeds 75% of the invested capital.
(4) In this section—
“the invested capital”, in relation to the continuing investment, means the amount subscribed for the securities or shares concerned, and
“an amount of insignificant value” means an amount of value which—
is not more than £1,000, or
if it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the securities or shares included in the continuing investment.
(5) This section is subject to section 368 (value received if there is more than one investment).
(6) Value received is ignored, for the purposes of this section, so far as CITR attributable to any loan, securities or shares in respect of any one or more tax years has already been reduced or withdrawn on its account.
365 Receipts of insignificant value to be added together
(1) This section applies if—
(a) value is received (“the relevant receipt”) by the investor from the CDFI at any time during the 6 year period relating to the investment,
(b) the investor has received from the CDFI one or more receipts of insignificant value at a time or times—
(i) during that period, but
(ii) not later than the time of the relevant receipt, and
(c) the total amount of the value of the receipts within paragraph (a) and (b) is not an amount of insignificant value.
(2) The investor is treated for the purposes of this Part as if the relevant receipt had been a receipt of an amount of value equal to that total amount.
(3) A receipt does not fall within subsection (1)(b) if the whole or any part of it has previously formed part of a total amount falling within subsection (1)(c).
(4) For the purposes of this section “an amount of insignificant value” means an amount of value which—
(a) is not more than £1,000, or
(b) if it is more than £1,000, is insignificant in relation to the relevant amount.
(5) If the investment consists of a loan, the relevant amount for the purposes of subsection (4) is—
(a) if the relevant receipt is received in the first or second year of the 6 year period, the average capital balance of the loan for the second year of that period, and
(b) if the relevant receipt is received in a later year, the average capital balance of the loan for the year in question.
(6) For the purposes of subsection (5)—
(a) the average capital balance of the loan for a year is the mean of the daily balances of capital outstanding during the year, and
(b) the relevant receipt and any receipts within subsection (1)(b) are ignored when calculating the average capital balance for the year in question.
(7) If the investment consists of securities or shares, the relevant amount for the purposes of subsection (4) is—
(a) if the relevant receipt is received in the first year of the 6 year period, the amount subscribed for the securities or shares, and
(b) in any other case, the amount subscribed for such of the securities or shares as—
(i) are held by the investor at the time the relevant receipt is received, and
(ii) have been held by the investor, as sole beneficial owner, continuously since the investment was made.
(8) This section is subject to section 368 (value received if there is more than one investment).
(1) For the purposes of this Chapter the investor receives value from the CDFI at any time when the CDFI—
(a) repays, redeems or repurchases any securities or shares included in the investment,
(b) releases or waives any liability of the investor to the CDFI or discharges, or undertakes to discharge, any liability of the investor to a third person,
(c) makes a loan or advance to the investor which has not been repaid in full before the investment is made,
(d) provides a benefit or facility for the investor or any associate of the investor,
(e) disposes of an asset to the investor for no consideration or for a consideration of an amount or value which is less than the market value of the asset,
(f) acquires an asset from the investor for a consideration of an amount or value which is more than the market value of the asset, or
(g) makes a payment to the investor other than a qualifying payment.
(2) For the purposes of subsection (1)(b) the CDFI is treated as having released or waived a liability if the liability is not discharged within 12 months of the time when it ought to have been discharged.
(3) For the purposes of subsection (1)(c) the following are treated as loans made by the CDFI to the investor—
(a) the amount of any debt due from the investor to the CDFI (other than an ordinary trade debt), and
(b) the amount of any debt due from the investor to a third person which has been assigned to the CDFI.
(4) For the purposes of this section—
(a) references to a debt or liability do not, in relation to a person, include references to any debt or liability which would be discharged by the making by that person of a qualifying payment,
(b) references to a benefit or facility do not include references to any benefit or facility provided in circumstances such that, if a payment had been made of an amount equal to its value, that payment would have been a qualifying payment, and
(c) any reference to a payment or disposal to a person includes a reference to a payment or disposal made to that person indirectly or to that person's order or for that person's benefit.
(5) In subsection (4) references to “a person” include references to any other person who, at any time in the 6 year period, is connected with that person, whether or not the other person is so connected at the material time.
(6) In this section—
“qualifying payment” means—
any payment by any person for any goods, services or facilities provided by the investor (in the course of the investor's trade or otherwise) which is reasonable in relation to the market value of those goods, services or facilities,
the payment by any person of any interest which represents no more than a reasonable commercial return on money lent to that person,
the payment by any company of any dividend or other distribution which does not exceed a normal return on any investment in shares in or securities of that company,
any payment for the acquisition of an asset which does not exceed its market value,
the payment by any person, as rent for any property occupied by the person, of an amount which is not more than a reasonable and commercial rent for the property, and
a payment in discharge of an ordinary trade debt, and
“ordinary trade debt” means any debt for goods or services supplied in the ordinary course of a trade or business if any credit given—
is for not more than 6 months, and
is not longer than that normally given to customers of the person carrying on the trade or business.
In a case falling within a provision listed in column 1 of the following table, the amount of value received for the purposes of this Chapter is given by the corresponding entry in column 2 of the table.
Provision | The amount of value received
Section 366(1)(a) | The amount received by the investor
Section 366(1)(b) | The amount of the liability
Section 366(1)(c) | The amount of the loan or advance, less the amount of any repayment made before the investment is made
Section 366(1)(d) | The cost to the CDFI of providing the benefit or facility, less any consideration given for it by the investor or any associate of the investor
Section 366(1)(e) or (f) | The difference between the market value of the asset and the consideration (if any) received for it
Section 366(1)(g) | The amount of the payment
368 Value received if there is more than one investment
(1) This section applies if—
(a) the investor makes two or more investments in the CDFI,
(b) the investor is eligible for and claims CITR in respect of those investments, and
(c) the investor receives value (other than value within section 366(1)(a)) which is received within the 6 year periods relating to two or more of those investments.
(2) Sections 363, 364, 365 and 369 have effect in relation to each investment referred to in subsection (1)(c) as if the amount of the value received were reduced by multiplying it by the fraction—
A
B
where—
(a) A is the appropriate amount in respect of the investment in question, and
(b) B is the sum of that amount and the appropriate amount or amounts in respect of the other investment or investments.
(3) If the investment consists of a loan, the appropriate amount for the purposes of subsection (2) is—
(a) if the value is received in the first or second year of the 6 year period, the average capital balance of the loan for the second year of that period, and
(b) if the value is received in a later year, the average capital balance of the loan for the year in question.
(4) For the purposes of subsection (3)—
(a) the average capital balance of the loan for a year is the mean of the daily balances of capital outstanding during the year, and
(b) the receipt of value is ignored when calculating the average capital balance for the year in question.
(5) If the investment consists of securities or shares, the appropriate amount for the purposes of subsection (2) is—
(a) if the value is received in the first year of the 6 year period, the amount subscribed for the securities or shares, and
(b) in any other case, the amount subscribed for such of the securities or shares as—
(i) are held by the investor at the time the value is received, and
(ii) have been held by the investor, as sole beneficial owner, continuously since the investment was made.
369 Effect of receipt of value on future claims for CITR
(1) This section applies if the investment consists of securities or shares and—
(a) the investor receives any value (other than an amount of insignificant value) from the CDFI during the 6 year period, and
(b) the investment or a part of it is held by the investor at the time the value is received and has been held by the investor, as sole beneficial owner, continuously since the investment was made (“the continuing investment”),
but no CITR attributable to the continuing investment is withdrawn under section 364 as a result of the receipt.
(2) For the purposes of calculating any CITR in respect of any securities or shares included in the continuing investment for any relevant tax year, the amount subscribed for the securities or shares included in the continuing investment is treated as reduced by the amount of the value received.
(3) For this purpose the “relevant” tax years are—
(a) any tax year ending on or after the anniversary of the investment date immediately before the receipt of value, or
(b) if the value was received on an anniversary of the investment date, any tax year ending on or after that anniversary.
(4) For the purposes of this section “an amount of insignificant value” means an amount of value which—
(a) is not more than £1,000, or
(b) if it is more than £1,000, is insignificant in relation to the amount subscribed by the investor for the securities or shares included in the continuing investment.
(5) This section is subject to section 368 (value received if there is more than one investment).
370 Receipts of value by or from connected persons
In sections 363 to 369, if the context permits, references to the investor or the CDFI include references to any person who at any time in the 6 year period relating to the investment is connected with the investor or, as the case may be, the CDFI, whether or not the person is connected at the material time.
(1) This section applies if any CITR has been obtained which falls to be withdrawn or reduced under this Chapter.
(2) The CITR must be withdrawn or reduced by making an assessment to income tax for the tax year for which the CITR was obtained.
(3) No assessment may be made under subsection (2) because of any event occurring after the death of the investor.
(4) An assessment under this paragraph may be made at any time not more than 6 years after the end of the tax year for which the relief was obtained.
(5) Subsection (4) is without prejudice to section 36(1A) of TMA 1970 (loss of tax brought about deliberately etc).
(1) In this Part and regulations made under Chapter 2 of this Part—
(a) references to a “loan” include references to alternative finance arrangements, and
(b) references to “interest” include references to alternative finance return.
(2) In subsection (1)—
“alternative finance arrangements” means arrangements to which any of the following applies—
section 564C (purchase and resale arrangements),
section 564E (deposit arrangements), and
section 564F (profit share agency arrangements), and
“alternative finance return” has the meaning given by section 564I and 564L(1) and (2).
(3) Subsection (1) needs to be read with—
(a) section 372B, in the case of arrangements to which section 564C applies,
(b) section 372C, in the case of arrangements to which section 564E applies, and
(c) section 372D, in the case of arrangements to which section 564F applies.
(1) This section applies if, under arrangements to which section 564C applies, a person (“the first purchaser”) purchases an asset that is sold to another person (“the second purchaser”).
(2) This Part and regulations made under Chapter 2 of this Part have effect in relation to the arrangements in accordance with subsections (3) to (9).
(3) The first purchaser is treated as making a loan to the second purchaser.
(4) The amount of the loan is treated as being equal to the first purchase price.
(5) If the arrangements provide that the first purchaser will transfer ownership of the asset to the second purchaser in instalments—
(a) references to the loan being drawn down over a period of time include references to the asset being transferred to the second purchaser in instalments,
(b) references to the date on which the first amount of the loan is drawn down include references to the date on which the first instalment is transferred to the second purchaser, and
(c) references to the amount drawn down at a given date include references to the value of the instalments transferred at that date.
(6) In calculating the amount of capital outstanding on the loan, each payment of the second purchase price (or part of the second purchase price), as reduced by any amount of alternative finance return included within each payment, is treated as repayment of the loan capital.
(7) References to the beneficial owner of the loan include references to the person beneficially entitled to payment of the second purchase price.
(8) References to the disposal of the whole or any part of the loan include references to the disposal of the right to receive payment of the whole or any part of the outstanding second purchase price.
(9) If arrangements to which section 564C applies are, as a result of this section, qualifying investments under Chapter 3 of this Part, paragraph (f) of section 366(1) is to be ignored in relation to the arrangements concerned.
(10) In this section “the first purchase price” and “the second purchase price” have the same meaning as in section 564C.
(1) This section applies if, under arrangements to which section 564E applies, a person (“the depositor”) deposits money with a financial institution.
(2) This Part and regulations made under Chapter 2 of this Part have effect in relation to the arrangements in accordance with subsections (3) to (9).
(3) The depositor is treated as making a loan to the financial institution.
(4) The amount of the loan is treated as being equal to the money deposited under the arrangements.
(5) If the arrangements provide that the depositor will deposit a sum of money with the financial institution in instalments—
(a) references to the loan being drawn down over a period of time include references to the depositor depositing a sum of money with the financial institution in instalments,
(b) references to the date on which the first amount of the loan is drawn down include references to the date on which the first instalment is deposited with the financial institution, and
(c) references to the amount drawn down at a given date include references to the value of the instalments deposited with the financial institution at that date.
(6) The capital outstanding on the loan is treated as being equal to the balance of the repayable deposit.
(7) References to any repayment of the loan include references to any repayment of the deposit.
(8) References to the beneficial owner of the loan include references to the person beneficially entitled to repayment of the deposit.
(9) References to the disposal of the whole or any part of the loan include references to the disposal of the right to receive repayment of the whole or any part of the deposit.
(10) In this section “financial institution” has the same meaning as in Part 10A (see section 564B).
(1) This section applies if, under arrangements to which section 564F applies, a person (“the principal”) appoints a financial institution as agent.
(2) This Part and regulations made under Chapter 2 of this Part have effect in relation to the arrangements in accordance with subsections (3) to (9).
(3) The principal is treated as making a loan to the agent.
(4) The amount of the loan is treated as being equal to the money provided by the principal to the agent under the arrangements.
(5) If the arrangements provide that the principal will provide a sum of money to the agent in instalments—
(a) references to the loan being drawn down over a period of time include references to the principal providing a sum of money to the agent in instalments,
(b) references to the date on which the first amount of the loan is drawn down include references to the date on which the first instalment is provided to the agent, and
(c) references to the amount drawn down at a given date include references to the value of the instalments provided to the agent at that date.
(6) The capital outstanding on the loan is treated as being equal to the balance of the repayable money provided to the agent.
(7) References to any repayment of the loan include references to any repayment of the money provided to the agent.
(8) References to the beneficial owner of the loan include references to the person beneficially entitled to repayment of the money provided to the agent.
(9) References to the disposal of the whole or any part of the loan include references to the disposal of the right to receive repayment of the whole or any part of the money provided to the agent.
(10) In subsection (1) “financial institution” has the same meaning as in Part 10A (see section 564B).
(1) If—
(a) the investor has obtained CITR in respect of the investment, and
(b) an event occurs because of which CITR attributable to the investment in respect of any tax year falls to be withdrawn or reduced by virtue of section 360, 361, 362 or 364,
the investor must give an officer of Revenue and Customs a notice containing particulars of the event.
(2) Subject to subsection (3), a notice under subsection (1) must be given not later than the normal self-assessment filing date for the tax year in which the event occurred.
(3) If—
(a) the investor is required to give a notice as a result of the receipt of value by a person connected with the investor (see section 370), and
(b) the end of the period of 60 days beginning when the investor comes to know of that event is later than the final notice date under subsection (2),
the notice must be given before the end of that 60 day period.
(1) No obligation as to secrecy or other restriction on the disclosure of information imposed by statute or otherwise prevents the disclosure of information—
(a) by the Secretary of State to an officer of Revenue and Customs for the purpose of assisting Her Majesty's Revenue and Customs to discharge their functions under the Income Tax Acts so far as relating to matters arising under this Part, or
(b) by an officer of Revenue and Customs to the Secretary of State for the purpose of assisting the Secretary of State to discharge the Secretary of State's functions under this Part.
(2) Information obtained by such disclosure is not to be further disclosed except for the purposes of legal proceedings arising out of the functions referred to.
(1) For the purposes of this Part—
(a) loans made by or to, or disposed of by, a nominee for a person are treated as made by or to, or disposed of by, that person, and
(b) securities or shares subscribed for by, issued to, acquired or held by or disposed of by a nominee for a person are treated as subscribed for by, issued to, acquired or held by or disposed of by that person.
(2) For the purposes of subsection (1) references to things done by or to a nominee for a person include things done by or to a bare trustee for a person.
376 Application for postponement of tax pending appeal
No application may be made under section 55(3) or (4) of TMA 1970 (application for postponement of payment of tax pending appeal) on the ground that an individual is eligible for CITR unless a claim for the CITR has been duly made by the individual under this Part.
377 Identification of securities or shares on a disposal
(1) This section applies for the purpose of identifying the securities or shares disposed of in any case where—
(a) the investor disposes of part of a holding of securities or shares (“the holding”), and
(b) the holding includes securities or shares to which CITR is attributable in respect of one or more tax years that have been held continuously by the investor from the time they were issued until the disposal.
(2) Any disposal by the investor of securities or shares included in the holding which have been acquired by the investor on different days is treated as relating to those acquired on an earlier day rather than to those acquired on a later day.
(3) If there is a disposal by the investor of securities or shares included in the holding which have been acquired by the investor on the same day, any of those securities or shares—
(a) to which CITR is attributable, and
(b) which have been held by the investor continuously from the time they were issued until the time of disposal,
are treated as disposed of after any other securities or shares included in the holding which were acquired by the investor on that day.
(4) For the purposes of this section a holding of securities is any number of securities of a company which—
(a) carry the same rights,
(b) were issued under the same terms, and
(c) are held by the investor in the same capacity.
It does not matter for this purpose that the number of the securities grows or diminishes as securities carrying those rights and issued under those terms are acquired or disposed of.
(5) For the purposes of this section a holding of shares is any number of shares in a company which—
(a) are of the same class, and
(b) are held by the investor in the same capacity.
It does not matter for this purpose that the number of the shares grows or diminishes as shares of that class are acquired or disposed of.
(6) In a case to which section 127 of TCGA 1992 (equation of original shares and new holding) applies, shares comprised in the new holding are to be treated for the purposes of subsections (2) and (3) as acquired when the original shares were acquired.
(7) In subsection (6)—
(a) the reference to section 127 of TCGA 1992 includes a reference to that section as it is applied by virtue of any enactment relating to chargeable gains, and
(b) “original shares” and “new holding” have the same meaning as in section 127 of TCGA 1992 or (as the case may be) that section as applied by virtue of the enactment in question.
(1) In this Part—
(a) references (however expressed) to an issue of securities of any body are to such securities of that body as carry the same rights and are issued under the same terms and on the same day, and
(b) references (however expressed) to an issue of shares in any body are to such shares in that body as are of the same class and issued on the same day.
(2) In this Part references (however expressed) to an issue of securities of or shares in a body to an individual are to such of the securities or shares in an issue of securities of or shares in that body as are issued to that individual in one capacity.
(1) Subject to subsection (2), in this Part “disposal” is read in accordance with TCGA 1992, and related expressions are read accordingly.
(2) An investor is treated as disposing of any securities or shares which but for section 151BC(1) of TCGA 1992 the investor—
(a) would be treated as exchanging for other securities or shares by virtue of section 136 of that Act, or
(b) would be so treated but for section 137(1) of that Act (which restricts section 136 to genuine reconstructions).
380 Construction of references to being “held continuously”
(1) This section applies if for the purposes of this Part it becomes necessary to determine whether the investor has held the investment (or any part of it) continuously throughout any period.
(2) The investor is not treated as having held the investment (or any part of it) continuously throughout a period if the investor—
(a) is treated, under any provision of TCGA 1992, as having disposed of and immediately re-acquired the investment (or part) at any time during the period, or
(b) is treated as having disposed of the investment (or part) at any such time, by virtue of section 379(2).
(1) In this Part “associate”, in relation to a person, means—
(a) any relative or partner of that person,
(b) the trustee or trustees of any settlement in relation to which that person, or any relative of that person (living or dead), is or was a settlor, and
(c) if that person has an interest in any shares or obligations of a company which are subject to any trust or are part of the estate of a deceased person—
(i) the trustee or trustees of the settlement concerned or, as the case may be, the personal representatives of the deceased, and
(ii) if that person is a company, any other company which has an interest in those shares or obligations.
(2) In subsection (1)(a) and (b) “relative” means spouse or civil partner, ancestor or lineal descendant.
(3) In subsection (1)(b) “settlor” and “settlement” have the same meaning as in Chapter 5 of Part 5 of ITTOIA 2005 (see section 620 of that Act).
(1) In this Part—
“body” includes an unincorporated association, and
“bonus shares” means shares which are issued otherwise than for payment (whether in cash or otherwise).
(2) For the purposes of this Part shares in a company are not treated as being of the same class unless they would be so treated if dealt in on a recognised stock exchange.
(3) For the purposes of this Part the market value at any time of any asset is the price which it might reasonably be expected to fetch on a sale at that time in the open market free from any interest or right which exists by way of security in or over it.
(4) In this Part—
(a) references to CITR obtained by the investor in respect of any investment (or part of an investment) include references to CITR obtained by the investor in respect of that investment (or part) at any time after the investor has disposed of it, and
(b) references to the withdrawal or reduction of CITR obtained by the investor in respect of the investment (or any part of it) include references to the withdrawal or reduction of CITR obtained in respect of that investment (or part) at any such time.
(5) In the case of any condition that cannot be met until a future date—
(a) references in this Part to a condition being met for the time being are to nothing having occurred to prevent its being met, and
(b) references to its continuing to be met are to nothing occurring to prevent its being met.
(1) A person who pays interest in a tax year is entitled to relief for the tax year for the interest if—
(a) the loan on which the interest is payable is a loan to which a provision specified in subsection (2) applies,
(b) the interest is eligible for relief in accordance with this Chapter, and
(c) the person makes a claim.
(2) The provisions are—
(a) section 388 (loan to buy plant or machinery for partnership use),
(b) section 390 (loan to buy plant or machinery for employment use),
(c) section 392 (loan to buy interest in close company etc),
(d) section 396 (loan to buy interest in employee-controlled company),
(e) section 398 (loan to invest in partnership),
(f) section 401 (loan to invest in co-operative), and
(g) section 403 (loan to pay inheritance tax).
(3) The amount of the relief given under subsection (1) is equal to the amount of the interest eligible for relief.
(4) The relief is given by deducting that amount in calculating the person's net income for the tax year in which the interest is paid (see Step 2 of the calculation in section 23).
(5) This section is subject to—
(a) section 384 (general restrictions on relief under this Chapter),
(aa) section 384B (restriction on relief where cash basis applies),
(b) section 385 (general provisions about loans),
(c) section 386 (loans partly meeting requirements),
(d) section 387 (exclusion of double relief etc), and
(e) section 405 (carry back and forward of relief for interest on loans within section 403).
(6) See also section 564O (under which this Chapter applies as if arrangements to which section 564C applies were loans and alternative finance return were interest).
(1) Relief is not to be given under this Chapter for interest on a debt incurred—
(a) by overdrawing an account, or
(b) by debiting the account of any person as the holder of a credit card or under similar arrangements.
(2) If the interest paid on a loan in a tax year exceeds a reasonable commercial amount of interest on the loan for the relevant period , relief is not to be given under this Chapter for so much of the interest as represents the excess.
(3) The relevant period is the tax year or, if the loan exists for part only of the tax year, the part of the tax year for which the loan exists.
(4) A reasonable commercial amount of interest on the loan for the relevant period is an amount which, together with any interest paid before that period (other than unrelieved interest), represents a reasonable commercial rate of interest on the loan from the date it was made to the end of that period.
(5) “Unrelieved interest” means interest which because of subsection (2) is not eligible for relief under this Chapter.
384A Restriction on relief where arrangements minimise risk to borrower
(1) Relief is not to be given under this Chapter for interest paid by a person on a loan if—
(a) the loan is made to the person (“the borrower”) as part of arrangements which appear very likely to produce a post-tax advantage, and
(b) the arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements.
(2) Arrangements “appear very likely” to produce a post-tax advantage if (and only if) it would be reasonable to assume from either or both of—
(a) the likely effect of the arrangements, and
(b) the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected,
that there is no risk, or only an insignificant risk, that they will not produce a post-tax advantage.
(3) “Produce a post-tax advantage” means give rise to a sum or sums—
(a) payable to the borrower or a person connected with the borrower, or
(b) payable to any other person for the benefit of the borrower or a person connected with the borrower,
of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is equal to or greater than the relevant amount.
(4) “The relevant amount” is the aggregate of—
(a) the amount required to meet the borrower's obligations in respect of the loan, and
(b) any amount which is used by the borrower in the same way as that which entitles the borrower to relief under this Chapter in respect of the loan and is not money lent to the borrower under any loan.
(5) If, with a view to securing that the condition in subsection (1)(a) is not met, the arrangements make provision for securing that, in all or any circumstances in which they do not produce a post-tax advantage, they will produce a broadly compensatory amount, the arrangements are to be regarded for the purposes of subsection (2) as making provision for securing the production of a post-tax advantage in those circumstances.
(6) “Produce a broadly compensatory amount” means give rise to a sum or sums payable as mentioned in subsection (3) of an amount (or aggregate amount) which, after making the appropriate tax adjustments, is not significantly less than the relevant amount.
(7) For the purposes of subsections (3) and (6) causing the value of an asset to be obtainable, directly or indirectly, by a person is to be treated as equivalent to giving rise to a sum payable to the person of an amount equal to that value.
(8) To make the appropriate tax adjustments for the purpose of subsection (3) or (6)—
(a) if A exceeds B, deduct the amount of the excess from the amount (or aggregate amount), and
(b) if B exceeds A, add the amount of the excess to the amount (or aggregate amount).
(9) For the purposes of subsection (8)—
A is the amount of any income tax, any capital gains tax and any tax under the law of a territory outside the United Kingdom to which the borrower is liable in consequence of the arrangements, and
B is the amount by which the borrower's liability to income tax and capital gains tax is (or apart from subsection (1) would be) reduced in consequence of the arrangements.
(10) Arrangements seem to have been designed to reduce any income tax or capital gains tax to which the borrower (or any person whose circumstances are like those of the borrower) would be liable apart from the arrangements if (and only if) it would be reasonable to assume from either or both of—
(a) the likely effect of the arrangements, and
(b) the circumstances in which the arrangements, or any parts of the arrangements, are entered into or effected,
that the arrangements, or any parts of the arrangements, are designed to do so.
(11) In this section “arrangements” means arrangements consisting of any number of agreements, understandings, schemes, transactions or other arrangements (whether or not legally enforceable); but in subsections (1)(a), (2), (5) and (9) the references to arrangements also include any related transactions.
(12) In subsection (11) “related transactions” means transactions in the case of which it is reasonable to assume from either or both of—
(a) the likely effect of the transactions, and
(b) the circumstances in which the transactions are entered into or effected,
that the transactions would not have been entered into or effected independently of the arrangements.
(13) Transactions are not prevented from being related transactions just because the transactions—
(a) are not between the same parties, or
(b) are not between parties to the arrangements.
384B Restriction on relief where cash basis applies
(1) Relief is not to be given under this Chapter for a tax year for interest paid by a person on a relevant loan if the partnership to which the loan relates carried on a UK property business or overseas property business the profits of which are calculated on the cash basis for the tax year (see section 271D of ITTOIA 2005).
(2) A loan is a “relevant loan” if—
(a) it is a loan to which section 388 applies (loan to buy plant or machinery for partnership use), or
(b) it is a loan to which section 398 applies (loan to invest in partnership) and which is not used for purchasing a share in a partnership.
(1) References in this Chapter to a loan being used or used in any way—
(a) are references to the money lent being applied or, as the case may be, applied in that way, and
(b) except in section 403 include references to a loan being used to meet expenditure already incurred or, as the case may be, already incurred on such a use.
(2) Sections 392, 396, 398, 401 and 403 apply to a loan only if it is made—
(a) in connection with the use of money, and
(b) on the occasion of its use or within what is in the circumstances a reasonable time from its use.
(3) Those sections apply to a loan only if the loan is used as mentioned in those sections without first having been used for another purpose.
(4) For the purposes of this Chapter the giving of credit for any money due from the purchaser under a sale is treated as the making of a loan used by the purchaser in making the purchase.
(1) If, at the time a loan (“the mixed loan”) is used, only part of the mixed loan is a loan to which any of the provisions specified in section 383(2) apply, for the purposes of this Chapter that part (“the qualifying part”) is treated as a loan to which the provision in question applies.
(2) Accordingly, the corresponding proportion of the interest on the mixed loan is eligible for relief.
(3) If a mixed loan is partly repaid, for the purposes of this Chapter the corresponding proportion of the repayment is treated as repaying the qualifying part (but see section 406(5)).
(4) In this section “the corresponding proportion” means the proportion that the qualifying part bears to the whole of the mixed loan at the time the mixed loan is used.
(1) Interest for which relief is given under this Chapter is not allowable as a deduction for any other income tax purposes.
(2) No relief is given under this Chapter for any tax year for the payment of any interest taken into account in calculating the profits of—
(a) any trade, profession or vocation,
(b) any UK property business, or
(c) any overseas property business.
(3) If interest is so taken into account, no relief is given under this Chapter for any relevant tax year for other interest on the same debt or liability.
(4) A tax year is a relevant one if the interest has been taken into account in calculating the profits of the trade, profession, vocation or business of the tax year.
(5) For the purposes of subsection (3) all interest which—
(a) is capable of being taken into account in calculating the profits of a trade, profession, vocation or business, and
(b) is payable by the same person on money advanced to the person on current account,
is treated as interest on the same debt.
(6) It does not matter whether the money is advanced—
(a) on one or more accounts, or
(b) by the same or separate banks or other persons.
(7) The reference in subsections (2) to (4) to interest taken into account is a reference to interest allowed as a deduction in an assessment which can no longer be varied (whether on appeal or otherwise).