Finance Act, 1974
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Tax avoidance: transactions associated with loans or credit. |
41.—(1) This section applies as respects any transaction effected with reference to the lending of money or the giving of credit, or the varying of the terms on which money is lent or credit is given, or which is effected with a view to enabling or facilitating any such arrangement concerning the lending of money or the giving of credit. | |
This subsection has effect whether the transaction is effected between the lender or creditor and the borrower or debtor, or between either of them and a person connected with the other or between a person connected with one and a person connected with the other. | ||
(2) If the transaction provides for the payment of any annuity or other annual payment, not being interest, being a payment chargeable to tax under Schedule D, the payment shall be treated for all the purposes of the Income Tax Acts and of the enactments relating to corporation profits tax as if it were a payment of annual interest. | ||
(3) If the transaction is one by which the owner of any securities or other property carrying a right to income agrees to sell or transfer the property, and by the same or any collateral agreement— | ||
(a) the purchaser or transferee, or a person connected with him, agrees that at a later date he will sell or transfer the same or any other property to the first-mentioned person, or a person connected with him, or | ||
(b) the first-mentioned person, or a person connected with him, acquires an option, which he subsequently exercises, to buy or acquire the same or any other property from the said purchaser or transferee or a person connected with him, | ||
then, without prejudice to the liability of any other person, the first-mentioned person shall be chargeable to tax under Case IV of Schedule D on an amount equal to any income which arises from the first-mentioned property at any time before the repayment of the loan or the termination of the credit. | ||
(4) If under the transaction a person assigns, surrenders or otherwise agrees to waive or forego income arising from any property (without a sale or transfer of the property) then, without prejudice to the liability of any other person, he shall be chargeable to tax under Case IV of Schedule D on a sum equal to the amount of income assigned, surrendered, waived or foregone. | ||
(5) If credit is given for the purchase price of any property, and the rights attaching to the property are such that, during the subsistence of the debt, the purchaser's rights to income from the property are suspended or restricted, he shall be treated for the purposes of subsection (4) as if he had surrendered a right to income of an amount equivalent to the income which he has in effect foregone by obtaining the credit. | ||
(6) The amount of any income payable subject to deduction of tax at the standard rate shall be taken for the purposes of subsection (4) as the amount before deduction of that tax. | ||
(7) References in this section to connected persons shall be construed in accordance with section 16 (2) of the Finance (Miscellaneous Provisions) Act, 1968 . |