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HMRC internal manual

Corporate Finance Manual

HM Revenue & Customs
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Other tax rules on corporate finance: structured finance: definitions


Section 775 defines that ‘arrangement’ as used in sections 758 to 769 is to include any agreement or understanding, whether it is legally enforceable or not.

Section 759(6) defines ‘income deduction’ - see CFM73110.

Section 776 provides that receiving an asset or payments in respect of an asset includes:

  • obtaining the value of, or a benefit from, an asset, whether directly or indirectly,
  • the discharge in whole or in part of any liability (in relation to income arising on or after 6 March 2007),
  • payments in respect of any asset that is substituted for the original asset (in relation to income arising on or after 6 March 2007),
  • and also provides that any reference to a disposal of an asset includes anything which is a disposal for the purposes of the TCGA. Thus it includes a part disposal (see TCGA92/S21(2)) and the grant of a lease.

Example of S776

  • Company A and B are connected. A owns a property that it intends to lease to B, but also has a borrowing needs of 100.
  • A grants to a third party Bank a one-year lease over the property for a premium of 100. This represents the funding that A needs.
  • Bank then immediately grants a one-year lease to B. No premium is paid, but rent payable by B to Bank the next 12 months will be 105, representing repayment of the funding plus interest.

Section 776 ensures that Bank is for section 758 purposes treated as receiving payments in respect of the security transferred by A even though those payments derive from a separate asset. This is because it derives a benefit or value from that asset by creating the sublease.

‘Connected’ takes the meaning given in CTA10/S1122.

The references to the borrower’s accounts are extended by section 774(2) to include any consolidated group accounts of which the borrower is a member.