(1)In the case of purchase and resale arrangements, so much of the second purchase price as is specified under the following provisions of this section is alternative finance return for the purposes of this Part.
(2)If under the arrangements the whole of the second purchase price is paid on one day, the alternative finance return equals the amount by which the second purchase price exceeds the first purchase price.
(3)If under the arrangements the second purchase price is paid by instalments, the alternative finance return in each instalment equals the appropriate amount.
(4)The appropriate amount is an amount equal to the interest which would have been included in the instalment on the assumptions in subsection (5).
(5)The assumptions are that—
(a)interest is payable on a loan by the first purchaser to the second purchaser of an amount equal to the first purchase price,
(b)the total interest payable on the loan is equal to the amount by which the second purchase price exceeds the first purchase price,
(c)the instalment is a part repayment of the principal of the loan with interest, and
(d)the loan is made on arm's length terms and accounted for under generally accepted accounting practice.
(6)In this section expressions used in section 503 have the same meaning as in that section.