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HMRC internal manual

Corporate Finance Manual

Other tax rules on corporate debt: transfers of income streams: transferees


Company transferees

The legislation at CTA09/PT6/CH2B onwards establishes that where the purchaser of relevant receipts is a company it is treated as party to a loan relationship. Whether the transferor is a company or not, the consideration for the transfer of the right to relevant receipts is treated as a money debt which is owed to the transferee by the person who falls to pay the relevant receipts and the transfer is treated as a transaction for the lending of money.

This treatment means that the company obtains relief, on an accounts basis, for the cost of acquiring the income stream against any receipts arising from the income stream or from its subsequent sale. The transferee company is charged to corporation tax only on the profit recognised in its profit and loss account in respect of the relevant receipts.


Z Ltd pays £100,000 for the right to income of £110,000 over two years.

The consideration of £100,000 for the transfer of the right to relevant receipts is to be treated as a money debt which is owed to the transferee, so the tax treatment will mirror the accounting treatment and reflect an allocation of the £100,000 to Z Ltd’s balance sheet assets. Of the income of £110,000, £100,000 is treated as reducing the amount in the balance sheet and the profit of £10,000 is treated as passing through the profit and loss account over the two years. The result is that the margin of £10,000 is chargeable as a loan relationship credit.

Non-corporate transferees

There is no equivalent legislation for individual transferees. However, if they are financial traders then they will be taxed on their profit margin from this transaction as the consideration for the right to the income and the income received are reflected in their profit and loss accounts.

Generally, for other non-corporate transferees the acquisition of the income stream will be a discounting transaction within ITTOIA05/S381, because the income stream will be acquired at a discount to its face value. In these circumstances too the margin will be treated in the same way as interest.