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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Deemed loan relationships: alternative finance: treatment as loan relationships

Alternative finance arrangements and loan relationships

A company that enters into an alternative finance arrangement is to be treated as if it had entered into a loan relationship. References to a loan relationship in the Taxes Acts include references to alternative finance arrangements (CTA09/S509), and therefore for corporation tax purposes all the loan relationship rules apply as they would do to conventional arrangements.

CTA09/S510 provides that the amount of the loan to which a company is party is as follows.

  • Under a purchase and resale arrangement it is the first purchase price of the asset.
  • Under a diminishing shared ownership arrangement it is the amount paid by the financial institution for its acquisition of its beneficial interest in the asset.
  • Under a deposit arrangement it is the amount deposited by the company with the financial institution.
  • Under a profit share agency arrangement, it is the amount provided under the arrangement by the principal to the agent.

No specific statutory provision is necessary for alternative finance investment bonds. The amount of the loan, for a corporate holder or issuer, will be the amount shown in accounts prepared in accordance with GAAP.

In each case, the alternative finance return payable on the arrangement is treated as if it were interest payable under the loan relationship.