Repo under arrangement designed to produce quasi-interest: anti-avoidance
12(1)This paragraph applies if—
(a)under an arrangement a person receives any money or other asset (“the advance”) from a company (or a partnership of which the company is a member),
(b)the company does not have a creditor repo or creditor quasi-repo by reference to the arrangement but would have one on the applicable accounting assumption (reading condition E in paragraphs 7 and 8 in the light of that assumption),
(c)the arrangement is designed to produce a return (“the quasi- interest”) to the company (or partnership of which it is a member) which equates, in substance, to the return on an investment of money at interest, and
(d)the main purpose, or one of the main purposes, of the arrangement is the obtaining of a tax advantage.
(2)Paragraph 10 is to have effect as if—
(a)the company had a creditor repo by reference to the arrangement, and
(b)the quasi-interest were an amount recorded as mentioned in sub-paragraph (4) of that paragraph.
(3)In this paragraph “the applicable accounting assumption” is the assumption that, in accordance with generally accepted accounting practice, the accounts of the company (or the partnership of which it is a member) for the period in which the advance is made record a financial asset in respect of the advance.