176Exception for loans on ordinary commercial termsU.K.
(1)A loan on ordinary commercial terms is not a taxable cheap loan.
(2)In this section a “loan on ordinary commercial terms” means a loan—
(a)made by a person (“the lender”) in the ordinary course of a business carried on by the lender which includes—
(i)the lending of money, or
(ii)the supplying of goods or services on credit, and
(b)in relation to which condition A, B or C is met.
(3)Condition A is met if—
(a)at the time the loan was made comparable loans were available to all those who might be expected to avail themselves of the services provided by the lender in the course of the lender’s business,
(b)a substantial proportion of the loans (consisting of the loan in question and the comparable loans) made by the lender at or about the time the loan in question was made were made to members of the public,
(c)the loan in question is held on the same terms as comparable loans generally made by the lender to members of the public at or about the time the loan in question was made, and
(d)where those terms differ from the terms applicable immediately after the loan in question was first made, they were imposed in the ordinary course of the lender’s business.
(4)For the purposes of condition A a loan is comparable to another loan if it is made for the same or similar purposes and on the same terms and conditions.
(5)Condition B is met if—
(a)the loan has been varied before 6th April 2000,
(b)a substantial proportion of the relevant loans were made to members of the public,
(c)the loan in question is held on the same terms as relevant loans generally made by the lender to members of the public at or about the relevant time, and
(d)where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.
(6)Condition C is met if—
(a)the loan has been varied on or after 6th April 2000,
(b)a substantial proportion of the relevant loans were made to members of the public,
(c)at the relevant time members of the public who had loans from the lender for similar purposes had a right to vary their loans on the same terms and conditions as applied in relation to the variation of the loan in question,
(d)the loan in question as varied is held on the same terms as any existing loans so varied, and
(e)where those terms differ from the terms applicable immediately after the relevant time, they were imposed in the ordinary course of the lender’s business.
(7)For the purposes of condition B and C—
(a)the “relevant time” is the time of the variation of the loan in question, and
(b)the “relevant loans” are—
(i)the loan in question,
(ii)any existing loans which were varied at or about the relevant time so as to be held on the same terms as the loan in question after it was varied, and
(iii)any new loans which were made by the lender at or about that time and are held on those terms.
(8)No account is to be taken of amounts which are incurred on fees, commission or other incidental expenses by the person to whom a loan is made for the purpose of obtaining the loan—
(a)in determining for the purposes of condition A whether loans made by a lender before 1st June 1994 are made or held on the same terms or conditions, or
(b)in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.
(9)No account is to be taken of amounts which are incurred on penalties, interest or similar amounts by the person to whom a loan is made as a result of varying the loan in determining for the purposes of condition B or C whether rights to vary loans are exercisable on the same terms and conditions or loans are held on the same terms.
(10)For the purposes of this section a “member of the public” means a member of the public at large with whom the lender deals at arm’s length.