Part 16Factoring of income etc
Chapter 2Finance arrangements
Type 2 arrangements
766Deemed loan relationship
1
This section applies if—
a
there is a type 2 finance arrangement, and
b
the transferor is a company within the charge to corporation tax.
2
In relation to the company—
a
the advance is treated for the purposes of Chapter 9 of Part 5 of CTA 2009 (and the other provisions of that Part (loan relationships)) as a money debt owed by the partnership, and
b
the arrangement is treated as a transaction for the lending of money from which the debt is treated as arising for those purposes.
3
Any amount which in accordance with generally accepted accounting practice is recorded in the partnership's accounts as a finance charge in respect of the advance is treated as interest payable by the company under the transaction.
4
The reference in subsection (3) to the partnership's accounts includes a reference to the transferor's accounts.
5
If an amount is treated as interest (“deemed interest”) under subsection (3), to find out when it is paid—
a
treat the payments mentioned in section 763(2)(e) as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance,
b
treat the interest elements of the payments as paid when the payments are paid, and
c
treat the deemed interest as paid at the times when the interest elements are treated as paid.