Valid from 01/04/2009

Part 6 U.K. Relationships treated as loan relationships etc

Chapter 6 U.K. Alternative finance arrangements

Arrangements that are alternative finance arrangements U.K.

503 Purchase and resale arrangements U.K.

(1) This section applies to arrangements if—

(a) they are entered into between two persons (“the first purchaser” and “the second purchaser”), one or both of whom are financial institutions, and

(b) under the arrangements—

(i) the first purchaser purchases an asset and sells it to the second purchaser,

(ii) the sale occurs immediately after the purchase or in the circumstances mentioned in subsection (2),

(iii) all or part of the second purchase price is not required to be paid until a date later than that of the sale,

(iv) the second purchase price exceeds the first purchase price, and

(v) the excess equates, in substance, to the return on an investment of money at interest.

(2) The circumstances are that—

(a) the first purchaser is a financial institution, and

(b) the asset referred to in subsection (1)(b)(i) was purchased by the first purchaser for the purpose of entering into arrangements within this section.

(3) In this section—

• “the first purchase price” means the amount paid by the first purchaser in respect of the purchase, and

• “the second purchase price” means the amount payable by the second purchaser in respect of the sale.

(4) This section is subject to section 508 (provision not at arm's length: exclusion of arrangements from this section and sections 504 to 507).