Law

Income Tax Act 2007

United Kingdom · statute

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In force since 2026-09-16, as the publisher states.

Copy read on 2026-11-08. The page it was read from

Contains public sector information licensed under the Open Government Licence v3.0. Source: legislation.gov.uk, The National Archives.

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Contents: 1,664 provisions

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1,664 provisions

564W Diminishing shared ownership arrangements not partnerships

Diminishing shared ownership arrangements are not treated as a partnership for the purposes of the Income Tax Acts.

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564WA Diminishing shared ownership arrangements: further provision in respect of refinancing

(1) This section applies in respect of diminishing shared ownership arrangements to which 564DA applies. (2) If, under the arrangements, the customer disposes of an asset as mentioned in section 564DA(1)(b), any profit, gain or loss realised by the customer on the disposal of the asset is to be treated as not having been realised for income tax purposes. (3) If, under the arrangements, the customer— (a) disposes of an asset as mentioned in section 564DA(1)(b), (b) acquires the asset as mentioned in section 564DA(1)(d) and (e) or (2)(c) and (d), (c) and subsequently disposes of the asset, the disposal of the asset mentioned in paragraph (a) and the acquisition of the asset mentioned in paragraph (b) (together with any intervening disposals or acquisitions of the asset) are to be treated as not having occurred for the purpose of calculating, for income tax purposes, the amount of the profit, gain or loss realised by customer on the subsequent disposal of the asset. (4) In subsections (2) and (3), “the customer” has the same meaning as in section 564DA. (5) If, under arrangements to which section 564DA(2) applies (“successor arrangements”), the financier under the diminishing shared ownership arrangements that the successor arrangements supersede transfers their interest in a lease forming part of those arrangements to the financier under the successor arrangements, the transfer is not to be treated as involving a disposal or acquisition of the interest for income tax purposes.

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564X Treatment of principal under profit share agency arrangements

(1) The principal under profit share agency arrangements is not treated for the purposes of the Income Tax Acts as entitled to profits to which the agent is entitled in accordance with section 564F(1)(e). (2) And the agent under such arrangements is treated for those purposes as entitled to those profits and the profits specified in section 564F(1)(d). (3) In this section “the principal” and “the agent” are to be read in accordance with section 564F.

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564Y Provision not at arm's length: relevant return

(1) This section applies if arrangements to which section 564H (provision not at arm's length: exclusion of arrangements from sections 564C to 564G) applies would, but for that section, be alternative finance arrangements. (2) A person paying relevant return under the arrangements is not entitled to— (a) any deduction in respect of the relevant return in calculating profits or other income for income tax purposes, or (b) any deduction in respect of the relevant return in calculating net income. (3) In this section “relevant return” has the same meaning as in section 564H (see subsection (3) of that section).

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596 Deemed manufactured payments: stock lending arrangements

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1B) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1C) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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597 Deemed interest: cash collateral under stock lending arrangements

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598 Cash collateral under stock lending arrangements: supplementary

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599 Sections 597 and 598: quasi-stock lending arrangements and quasi-cash collateral

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600 Meaning of “quasi-stock lending arrangements” and “quasi-cash collateral”

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601 Repo cases in which deeming rules apply

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602 Deemed manufactured payments: repos

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603 Deemed deductions of tax

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604 Deemed increase in repurchase price: price differences under repos

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605 Deemed increase in repurchase price: other income tax purposes

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606 Interpretation of Chapter

(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (5) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (6A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (8) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (9) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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607 Treatment of price differences under repos

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608 Exceptions to section 607

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609 Additional income tax consequences of price differences

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610 Repurchase price in deemed manufactured payment case

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611 Power to modify Chapter in non-arm's length case

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612 Non-standard repo cases

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613 Redemption arrangements

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614 Sections 612 and 613: supplementary

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614ZA Overview of Part

This Part deals with the application of the Income Tax Acts to manufactured payment relationships and payments representative of dividends or interest.

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614ZB Key definitions

(1) For the purposes of the Income Tax Acts a person has a manufactured payment relationship if conditions A to C are met. (2) Condition A is that under any arrangements— (a) an amount is payable by or to the person, or (b) any other benefit is given by or to the person (including the release of the whole or part of any liability to pay an amount). (3) Condition B is that the arrangements relate to the transfer of securities. (4) Condition C is that the amount or value of the other benefit— (a) is representative of a dividend or interest on the securities, or (b) will fall to be treated as representative of such a dividend or interest when it is paid or given. (5) In subsection (2) the reference to an amount being payable, or other benefit being given, by the person includes a reference to an amount being payable, or other benefit being given, by another person on behalf of the person in question. (6) In this Part— “manufactured payment”, in relation to a manufactured payment relationship, means an amount, or the value of a benefit, within subsection (2), and “securities” means— shares in a company, and loan stock or any similar security (whether the security is of the government of the United Kingdom, any other government, any public or local authority in the United Kingdom or elsewhere, or any other company or body).

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614ZC Treatment of payer of manufactured payment

(1) This section applies where a person has a manufactured payment relationship under which a manufactured payment is paid by or on behalf of the person. (2) No deduction is allowed in respect of the manufactured payment in calculating any profits or other income of the person for income tax purposes (subject to subsection (3)). (3) Subsection (2) does not apply in relation to the person so far as the manufactured payment is brought into account under Part 2 of ITTOIA 2005 in calculating the profits of a trade carried on by the person. (4) But nothing in subsection (3) affects the question whether (apart from that provision) a deduction in calculating the profits of a trade carried on by the person is allowed.

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614ZD Treatment of recipient of manufactured payment

(1) Subsection (2) applies if a person has a manufactured payment relationship under which a manufactured payment is payable to the person. (2) For the purposes of the charge to income tax on the person's income, the Income Tax Acts apply to the person as if the manufactured payment were a dividend or interest on the securities (as the case may require). (3) Subsection (2) is subject to subsections (4) and (5). (4) Subsection (2) does not apply in relation to the person so far as the manufactured payment is brought into account under Part 2 of ITTOIA 2005 in calculating the profits of a trade carried on by the person. (5) Subsection (2) does not apply in relation to the person for the purposes of determining entitlement to double taxation relief in respect of any dividend or interest. (6) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (7) For the purposes of this section “double taxation relief” means any relief given under or as a result of Part 2 of TIOPA 2010.

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614A Overview of Part

(1) This Part makes provision for the purposes of income tax about the taxation of leasing arrangements. (2) Chapter 2 makes provision in relation to certain arrangements involving the lease of assets where the conditions in section 614BC are or have been met, so far as the lease is not regarded as a long-funding lease for the purposes of Part 2 of CAA 2001 in accordance with Chapter 6A of that Part (see sections 614BB to 614BE). (3) Chapter 3 makes provision in relation to arrangements involving the lease of assets that are not within Chapter 2, so far as the lease is not so regarded (see sections 614C and 614CB). (4) The remaining provisions of this Chapter explain some expressions about rent for the purposes of this Part. (5) Chapter 4 contains further provisions supplementing this Part, including more about its interpretation.

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614AA Normal rent

(1) For the purposes of this Part, the “normal rent” in respect of a lease for a period of account of the lessor (“L”) is the amount specified in subsection (2). (2) That amount is the amount that L would, apart from this Part, bring into account as rent from the lease that arises to L in that period of account for the purpose of determining L's liability to income tax for the related tax year or years. (3) For the meaning of “related tax year”, see section 614DB(4).

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614AB Accountancy rental earnings

(1) For the purposes of this Part, the “accountancy rental earnings” in respect of a lease for a period of account of the lessor (“L”) is the greatest of the amounts specified in subsection (2). (2) Those amounts are— (a) the rental earnings for that period in respect of the lease in L's case, (b) the rental earnings for that period in respect of the lease in the case of a person connected with L, and (c) the rental earnings for that period in respect of the lease for the purposes of consolidated group accounts of a group of companies of which L is a member. (3) For the meaning of “the rental earnings”, see section 614AC.

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614AC Rental earnings

(1) In this Part “the rental earnings” for any period in respect of a lease of an asset in the case of any person or any consolidated group accounts is the amount specified in subsection (2). (2) That amount is the amount that falls for accounting purposes to be treated, in accordance with generally accepted accounting practice, as the gross return for that period on investment in respect of a finance lease or loan in respect of the leasing arrangements. (3) For the meaning of “for accounting purposes”, see section 614DG.

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614B Arrangements to which this Chapter applies

(1) This Chapter applies to arrangements involving the lease of an asset that meet conditions A and B. (2) Condition A is that in accordance with generally accepted accounting practice the arrangements fall to be treated as a finance lease or loan. (3) Condition B is that the effect of the arrangements is that some or all of the return on investment in respect of the finance lease or loan— (a) is or may be in the form of a sum that is not rent, and (b) would not, apart from this Part and Part 21 of CTA 2010, be wholly brought into account for tax purposes as rent from the lease of the asset. (4) It does not matter— (a) when the arrangements are or have been entered into, or (b) whether they are or have been entered into by companies or other persons.

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614BA Purposes of this Chapter

(1) This section sets out the main purposes of this Chapter where there are any arrangements to which this Chapter applies. (2) The first main purpose is to charge any person entitled to the lessor's interest under the lease of the asset to income tax on amounts of income determined as mentioned in subsections (3) and (4). (3) The amounts referred to in subsection (2) are determined by reference to the amounts that fall for accounting purposes to be treated, in accordance with generally accepted accounting practice, as the income return on and after 26 November 1996 on investment in respect of the finance lease or loan. (4) The amounts referred to in subsection (2) are also determined taking into account the substance of the matter as a whole, including, in particular, the state of affairs— (a) as between connected persons, or (b) within a group of companies, as reflected or falling to be reflected in accounts of any of those persons or in consolidated group accounts. (5) The second main purpose of this Chapter is, if the sum mentioned in section 614B(3)(a) that is not rent falls due, to recover by reference to that sum the whole or any part of the capital expenditure reliefs. (6) In subsection (5) “the capital expenditure reliefs” means any reliefs, allowances or deductions that are or have been allowed or made in respect of capital expenditure incurred in respect of the leased asset.

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614BB Application of this Chapter

(1) This Chapter applies if— (a) a lease of an asset is or has been granted, and (b) the conditions in section 614BC are or have been met in relation to the lease at some time in a period of account of the current lessor. (2) But this Chapter does not apply so far as, in relation to the current lessor, the lease falls to be regarded as a long funding lease for the purposes of Part 2 of CAA 2001 (plant and machinery allowances) in accordance with Chapter 6A of that Part (interpretation of provisions about long funding leases) (see section 70G of that Act). (3) If the conditions in section 614BC have been met at some time in a period of account of the person who was at that time the lessor, they are taken to continue to be met for the purposes of this Chapter unless and until one of the conditions in subsection (4) is met. (4) The conditions are that— (a) the asset ceases to be leased under the lease, or (b) the lessor's interest under the lease is assigned to a person who is not connected with any of the persons specified in subsection (5). (5) Those persons are— (a) the assignor, (b) any person who was the lessor at some time before the assignment, and (c) any person who at some time after the assignment becomes the lessor pursuant to arrangements made by a person who was the lessor, or was connected with the lessor, at some time before the assignment. (6) If at any time the person who was the lessor at that time was a person within the charge to corporation tax on income, the reference in subsection (3) to the conditions in section 614BC having been met at that time includes a reference to the conditions in section 902 of CTA 2010 having been so met. (7) Nothing in subsection (3) prevents this Chapter from applying again in relation to the lease where the lessor's interest is assigned if the conditions for its application are met after the assignment.

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614BC The conditions referred to in section 614BB(1)

(1) This section sets out the conditions required by section 614BB(1) to be met for this Chapter to apply (conditions A to E). (2) Condition A is that at the relevant time— (a) the leasing arrangements fall for accounting purposes to be treated, in accordance with generally accepted accounting practice, as a finance lease or a loan, and (b) subsection (3) or (4) applies. (3) This subsection applies if the lessor (“L”), or a person connected with L, falls for accounting purposes to be treated, in accordance with generally accepted accounting practice, as the finance lessor in relation to the finance lease or loan. (4) This subsection applies if the finance lease or loan falls for accounting purposes to be treated, in accordance with generally accepted accounting practice, as subsisting for the purposes of consolidated group accounts of a group of companies of which L is a member. (5) Condition B is that, under the leasing arrangements, there is or may be payable to L, or to a person connected with L, a sum (a “major lump sum”) that is not rent but falls for accounting purposes to be treated, in accordance with generally accepted accounting practice— (a) as to part, as repayment of some or all of the investment in respect of a finance lease or loan, and (b) as to part, as a return on investment in respect of a finance lease or loan. (6) Condition C is that not all of that part of the sum that falls within subsection (5)(b) would, apart from this Chapter, fall to be brought into account for income tax purposes in tax years ending with the relevant tax year as the normal rent from the lease for periods of account of L. (7) Condition D is that, in relation to L at the relevant time— (a) the period of account of L in which the relevant time falls, or (b) an earlier period of account of L during which L was the lessor, is a period of account for which the accountancy rental earnings in respect of the lease exceed the normal rent for the period. (8) Condition E is that at the relevant time— (a) arrangements within section 614BE(1) exist, or (b) paragraph (a) does not apply and circumstances within section 614BE(3) exist. (9) Section 614BD supplements this section.

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614BD Provisions supplementing section 614BC

(1) In section 614BC— “the relevant tax year”, in relation to a major lump sum, means— the tax year which is related to the period of account of the lessor (“L”) in which the major lump sum is or may be payable in accordance with the leasing arrangements, or if there are two or more such tax years, the latest of them, and “the relevant time” means the time as at which it must be determined for the purposes of section 614BB(1) or (3) whether the conditions in section 614BC are or, as the case may be, were met. (2) For the meaning of a tax year being related to a period of account, see section 614DB(4). (3) Subsection (4) applies for determining the normal rent for a period of account for the purpose of determining whether condition D in section 614BC is met as respects L unless subsection (5) applies. (4) Rent that falls to be brought into account for income tax purposes as it falls due is treated— (a) as accruing evenly throughout the period to which, in accordance with the terms of the lease, each payment falling due relates, and (b) as falling due as it so accrues. (5) This subsection applies if any such payment as is mentioned in subsection (4)(a) falls due more than 12 months after the time at which any of the rent to which that payment relates is treated as accruing under subsection (4)(a).

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614BE The arrangements and circumstances referred to in section 614BC(8)

(1) The arrangements referred to in section 614BC(8)(a) are arrangements under which— (a) the lessee or a person connected with the lessee may acquire, whether directly or indirectly, the leased asset or an asset representing the leased asset from the lessor or a person connected with the lessor, and (b) in connection with that acquisition, the lessor or a person connected with the lessor may receive, whether directly or indirectly, a qualifying lump sum from the lessee or a person connected with the lessee. (2) In this section “qualifying lump sum” means any sum that is not rent but at least part of which would fall for accounting purposes to be treated, in accordance with generally accepted accounting practice, as a return on investment in respect of a finance lease or loan. (3) The circumstances referred to in section 614BC(8)(b) are circumstances which make it more likely— (a) that the events described in subsection (4) will occur, than (b) that the event described in subsection (5) will occur. (4) The events mentioned in subsection (3)(a) are— (a) that the lessee or a person connected with the lessee will acquire, whether directly or indirectly, the leased asset or an asset representing the leased asset from the lessor or a person connected with the lessor, and (b) that, in connection with that acquisition, the lessor or a person connected with the lessor will receive, whether directly or indirectly, a qualifying lump sum from the lessee or a person connected with the lessee. (5) The event mentioned in subsection (3)(b) is that, before any such acquisition as is mentioned in subsection (4) takes place, the leased asset or, as the case may be, the asset representing the leased asset, will have been acquired, in a sale on the open market, by an independent third party. (6) In subsection (5) “independent third party” means a person who— (a) is not the lessor or the lessee, and (b) is not connected with either of them. (7) For the meaning of an asset representing the leased asset, see section 614DD.

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614BF Current lessor taxed by reference to accountancy rental earnings

(1) This section applies if, in the case of any period of account of the current lessor (“L”)— (a) this Chapter applies in relation to the lease, and (b) the accountancy rental earnings in respect of the lease for that period of account exceed the normal rent for that period. (2) For income tax purposes, L is treated as if in that period of account L had been entitled to, and there had arisen to L, rent from the lease of an amount equal to those accountancy rental earnings (instead of the normal rent referred to in subsection (1)(b)). (3) Such rent from the lease of an asset is treated for income tax purposes— (a) as if it had accrued at an even rate throughout so much of the period of account as falls within the period for which the asset is leased, and (b) as if L had become entitled to it as it accrued.

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614BG Reduction of taxable rent by cumulative rental excesses: introduction

(1) This section and sections 614BH to 614BK provide for reductions of the taxable rent of a current lessor (“L”) under a lease to which this Chapter applies. (2) In this section and sections 614BH to 614BK “taxable rent”, in relation to a period of account of L, means the amount that would, apart from those sections, be treated for income tax purposes as rent from the lease that arises to L in that period of account for the purpose of determining L's liability to tax for the related tax year or years. (3) The reductions of taxable rent under sections 614BH to 614BK depend on there being— (a) a cumulative accountancy rental excess for the period of account of L in question, or (b) a cumulative normal rental excess for the period of account of L in question. (4) For the meaning of “cumulative accountancy rental excess” and “cumulative normal rental excess”, see sections 614BH and 614BJ respectively.

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614BH Meaning of “accountancy rental excess” and “cumulative accountancy rental excess”

(1) For the purposes of this Chapter, there is an “accountancy rental excess” in relation to the lease for a period of account of the current lessor (“L”) if the taxable rent in relation to the lease for the period is as a result of section 614BF (current lessor taxed by reference to accountancy rental earnings) an amount equal to the accountancy rental earnings. (2) The amount of the accountancy rental excess for the period is equal to the difference between the accountancy rental earnings for the period and the normal rent for the period. (3) But if the taxable rent for the period is reduced under section 614BK (reduction of taxable rent by the cumulative normal rental excess), there is only an accountancy rental excess for the period if— (a) the accountancy rental earnings, reduced by an amount equal to the reduction under that section, exceed (b) the normal rent. (4) And in that case the amount of the accountancy rental excess for the period is equal to that excess. (5) In this Chapter the “cumulative accountancy rental excess”, in relation to the lease and a period of account of L, means so much of the total of the accountancy rental excesses for previous periods of account of L (as increased under section 614BM: recovery of bad debts following reduction under section 614BL) as has not been— (a) set off under section 614BI (reduction of taxable rent by the cumulative accountancy rental excess) against the taxable rent for any such previous period, (b) reduced under section 614BL (relief for bad debts: reduction of cumulative accountancy rental excess), or (c) set off under section 37A of TCGA 1992 (consideration on disposal of certain leases) against the consideration for a disposal.

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