Finance Act 2007

Structured finance arrangements U.K.

3 (1) Section 774B of ICTA (disregard of intended effects of arrangement involving disposals of assets) is amended as follows. U.K.

(2) For subsection (1) substitute—

“(1) This section applies if an arrangement is a structured finance arrangement in relation to a person (“the borrower”).

(1A) If the arrangement would (disregarding this section) have had the relevant effect (see subsections (2) and (3)), the arrangement is not to have that effect.

(1B) If the arrangement would (disregarding this section) not have had that effect, the payments mentioned in section 774A(2)(d) are to be treated for tax purposes as income of the borrower payable in respect of the security (whether or not those payments are also the income of anyone else for tax purposes).”

(3) In subsection (4)(a) (income tax relief for finance charge in respect of advance), for the words from the beginning to “is a person” substitute “ a person in relation to whom this section applies is ”.

(4) In subsection (5) (corporation tax relief for finance charge in respect of advance), for the words from the beginning to “is a company” substitute “ If a person in relation to whom this section applies is ”.

4 U.K. In section 774D of ICTA (disregard of intended effects of arrangement involving change in relation to a partnership), after subsection (2) insert—

“(2A) In determining whether the condition in subsection (1)(b) is met it is to be assumed that amounts of income equal to the payments mentioned in section 774C(2)(f) or (4)(e) were payable to the borrower partnership before the time at which the relevant change in relation to its membership involving the lender or a person connected with the lender occurs.”

5 U.K. In section 774E of ICTA (exceptions), in subsection (7)(a) (meaning of “relevant person” where section 774B applies), for the words from “a person” to “of that section)” substitute “ the borrower under the structured finance arrangement, a person connected with that borrower or (if that borrower is a partnership) a member of the partnership ”.

6 (1) Section 774G of ICTA (minor definitions etc for purposes of sections 774A to 774D) is amended as follows. U.K.

(2) In paragraph (a) of subsection (3) (meaning of receiving asset)—

(a) for “include the person's” substitute “include—

(i) the person's”, and

(b) after “it” insert “, and

(ii) the discharge (in whole or in part) of any liability of the person,”.

(3) In paragraph (c) of that subsection (meaning of payments in respect of asset), for “include obtaining” substitute “include—

(i) payments in respect of any other asset substituted for it under the arrangement, and

(ii) obtaining”.

(4) After subsection (5) insert—

“(5A) In determining for the purposes of sections 774A to 774D whether an amount is recorded as a financial liability in respect of the advance it is to be assumed that the period of account in which the advance is received ended immediately after the receipt of the advance.”

7 (1) The amendments made by paragraphs 3 to 5 and 6(2) and (3) have effect in relation to any arrangements whenever made. U.K.

(2) But, in relation to arrangements made before 6th March 2007, amounts are as a result of any of those amendments—

(a) to be charged to tax, or

(b) to be brought into account in calculating any income for tax purposes or deducted from any income for tax purposes,

only if the amounts arise on or after that date.

(3) In any case where, in relation to arrangements made before that date, a person is treated as a result of any of those amendments as being a party to any loan relationship—

(a) a period of account is to be treated for the purposes of Chapter 2 of Part 4 of FA 1996 as beginning on that date, and

(b) the loan relationship is to be treated for those purposes as being entered into by the person for a consideration equal to the notional carrying value of the liability representing the relationship.

(4) For this purpose the notional carrying value is the amount that would have been the carrying value of the liability in the accounts of the person if a period of account had ended immediately before that date.

(5) “Carrying value” has the same meaning here as it has for the purposes of paragraph 19A of Schedule 19 to FA 1996.

(6) The amendment made by paragraph 6(4) comes into force on the day on which this Act is passed.

8 (1) Section 263E of TCGA 1992 (structured finance arrangements) is amended as follows. U.K.

(2) In subsection (2) (condition A: person making disposal of asset subsequently acquires it), for the words from “subsequently” to the end substitute “ (and no-one else) has the right or obligation under the arrangement to acquire the asset disposed of by that disposal at any subsequent time (whether or not the right or obligation is subject to any conditions). ”

(3) In subsection (3) (condition B: asset ceases to exist)—

(a) in paragraph (a), for “subsequently ceases” substitute “ will subsequently cease ”, and

(b) in paragraph (b), for “that asset was held” substitute “ it is intended that that asset will be held ”.

(4) After subsection (4) insert—

“(4A) If, at any time after that disposal, it becomes apparent that—

(a) the person making the disposal will not subsequently acquire under the arrangement the asset disposed of by that disposal, or

(b) that asset will not be held as mentioned in subsection (3)(b),

that person is to be treated for the purposes of this Act as disposing of that asset at that time for a consideration equal to its market value at that time.”

(5) In subsection (5) (disregard of subsequent acquisitions), for “Any” substitute “ Except in a case falling within subsection (4A), any ”.

(6) The amendments made by this paragraph have effect in relation to disposals made on or after 6th March 2007.

(7) The amendments made by this paragraph also have effect in relation to any disposal made by a person before that date if the person makes a claim to that effect under this sub-paragraph.