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Income Tax Act 2007

Type Public General Act

Publication 2007-03-20

Last updated 2026-01-20

State In force

Department Statute Law Database

Source legislation.gov.uk

articles Not indexed

Reform history JSON API

(a) at a time before the lease's creation the asset was used for the purposes of another trade,

(b) when it was so used it was owned by the person then carrying on the other trade, and

(5) The reference in subsection (2)(a) to a lease does not include a lease created on or before 14 April 1964.

(6) In this section references to a person carrying on a trade are to the person carrying on the trade for the time being.

Relief: restriction and carrying forward

681CC

(1) The rules in subsection (3) apply to the calculation of the deduction by way of relevant income tax relief allowed in a relevant period—

(a) for the non-excluded element of the payment within section 681CB(2), or

(b) if there are two or more such payments, for the non-excluded elements of those payments.

(2) For the purposes of this section—

(a) “relevant period” means—

(i) a period of account of the trade, or

(ii) if no accounts of the trade are drawn up for a period, ... a tax year, and

(b) the non-excluded element of a payment is the element of the payment not excluded under section 681CD (long funding finance leases).

(3) The rules are—

Rule 1 —meaning of amount E For any relevant period, amount E (which may be nil) is the expense or total expenses to be brought, in accordance with generally accepted accounting practice, into account in the period in respect of—the non-excluded element of the payment, orthe non-excluded elements of the payments.

Rule 2 — calculations For every relevant period—calculate the total of amount E for the period and amount E for every previous relevant period ending on or after the date of the creation of the lease mentioned in section 681CB(2)(a),calculate the total of the deductions by way of relevant income tax relief for every previous relevant period ending on or after that date, andsubtract the total at (b) from the total at (a) to give the cumulative unrelieved expenses for the period.

Rule 3 — meaning of post-spread period A relevant period is a post-spread period if for that relevant period, and every later relevant period, there are no payments within section 681CB(2).

Rule 4 — the deduction allowed in a relevant period If a relevant period is not a post-spread period, the deduction allowed for the period is equal to the cumulative unrelieved expenses for the period, but is the commercial rent for the period if that is less (see section 681CE).

Rule 5— relevant periods in which no deduction allowed If a relevant period is a post-spread period, no deduction is allowed for the period.

681CD

(1) This section applies for the purposes of section 681CC.

(2) A payment must be excluded so far as, in the case of the lessee, it is to be regarded in accordance with Chapter 6A of Part 2 of CAA 2001 as a payment under a lease which is a long funding finance lease for the purposes of that Part.

681CE

(1) Subsection (3) applies for the purpose of making a comparison under rule 4 of section 681CC(3).

(2) In this section “the actual lease” means the lease mentioned in section 681CB(2)(a).

(3) The commercial rent is the rent which might at the relevant time be expected to be paid under a lease of the asset if—

(a) the lease were for the rest of the asset's expected normal working life,

(b) the rent were payable at uniform intervals and at a uniform rate, and

(c) the rent gave a reasonable return for the asset's market value at the relevant time, taking account of the actual lease's terms and conditions.

(4) The relevant time is the time when the actual lease was created.

(5) An asset's expected normal working life is the period which might be expected, when it is first put into use, to pass before it is finally put out of use as being unfit for further use.

(6) In applying subsection (5) it must be assumed that the asset will be used in the normal way, and to the normal extent, throughout the period.

(7) If the asset is used at the same time partly for the purposes of the trade mentioned in section 681CB(2)(b) and partly for other purposes, the commercial rent as defined in subsection (3) is to be determined by reference to what would be paid for such partial use.

Interpretation

681CF

(1) This section applies for the purposes of this Chapter.

(2) A lease is (in relation to an asset) an agreement or arrangement under which payments are made for the use of or otherwise in respect of the asset.

(3) In particular it includes an agreement or arrangement under which the payments (or any of them) represent instalments of a purchase price or payments towards it.

681CG

For the purposes of this Chapter a relevant asset is any description of property or rights other than land or an interest in land.

Chapter 4 — Leased assets: capital sums

Overview

681D

This Chapter provides that in certain circumstances where a payment is made under a lease of an asset, and a capital sum is obtained in respect of an interest in the asset, income tax is charged on an amount not greater than the capital sum.

Application of the Chapter

681DA

This Chapter applies if—

(a) condition A is met (see section 681DB), and

(b) condition B, C, D or E is met (see section 681DC).

681DB

(1) Condition A is that—

(a) a payment is made under a lease of a relevant asset, and

(b) the payment is one for which a deduction by way of relevant tax relief is allowed.

(2) Condition A is not met if section 681CC (leased trading assets: tax deductions)—

(a) applies to the payment, or

(b) would apply to it but for its being excluded under section 681CD (long funding finance leases).

(3) Condition A is not met if section 865 of CTA 2010 (provision for corporation tax corresponding to section 681CC)—

(a) applies to the payment, or

(b) would apply to it but for its being excluded under section 866 of that Act (long funding finance leases).

(4) The reference in subsection (1)(a) to a lease does not include a lease created on or before 14 April 1964.

681DC

(1) Condition B is that the person making the payment—

(a) obtains a capital sum in respect of the lessee's interest in the lease, and

(b) is within the charge to income tax.

(2) Condition C is that an associate of the person making the payment—

(a) obtains a capital sum by way of consideration in respect of the lessee's interest in the lease, and

(b) is within the charge to income tax.

(3) Condition D is that—

(a) the lessor's interest in the lease, or any other interest in the asset, belongs to an associate of the person making the payment,

(b) the associate obtains a capital sum in respect of the interest, and

(4) Condition E is that—

(a) the lessor's interest in the lease, or any other interest in the asset, belongs to an associate of the person making the payment,

(b) an associate of that associate obtains a capital sum by way of consideration in respect of the interest, and

(5) Condition B, C, D or E may be met before, at or after the time when the payment is made.

(6) Condition B or C is not met if—

(a) the lease is a hire-purchase agreement for plant or machinery, and

(b) the capital sum is required to be brought into account as the whole or part of the disposal value of the plant or machinery under section 68 of CAA 2001.

(7) Condition D or E is not met if—

(a) the capital sum is obtained in respect of the lessee's interest in the lease,

(b) the lease is a hire-purchase agreement for plant or machinery, and

(c) the capital sum is required to be brought into account as the whole or part of the disposal value of the plant or machinery under section 68 of CAA 2001.

Charge to income tax

681DD

(1) The person obtaining the capital sum is charged to income tax, for the tax year in which the sum is obtained, on the amount given by subsection (2).

(2) That amount is—

(a) the amount of the payment for which a deduction by way of relevant tax relief is allowed, or

(b) the total amount of such payments (if more than one).

(3) But subsections (1) and (2) have effect subject to—

(a) subsections (4) to (7), and

(b) section 681DE(3) (hire-purchase agreements).

(4) The amount on which tax is charged under this section is not to exceed the capital sum obtained (but see section 681DE(4)).

(5) Subsection (6) applies if—

(a) income tax is charged under this section in respect of a capital sum, and

(b) a payment or part of a payment is taken into account in deciding the amount on which the tax is charged.

(6) The payment or part must be left out of account in deciding—

(a) whether income tax is to be charged under this section in respect of another capital sum, and

(b) the amount on which the tax is to be charged (if any is to be charged).

(7) The order in which subsections (5) and (6) are applied is the order in which capital sums are obtained.

(8) An amount on which income tax is charged under this section is treated for income tax purposes as an amount of income.

681DE

(1) This section applies if—

(a) the lease is a hire-purchase agreement (as defined in section 998A), and

(b) the capital sum is obtained in respect of the lessee's interest in the lease (whether it is obtained by the person making the payment or by an associate).

(2) Find the total of the following amounts—

(a) so much of any payment made under the lease by the person obtaining the capital sum as is not a payment for which a deduction by way of relevant tax relief is allowed, and

(b) if the lessee's interest was assigned to the person obtaining the capital sum, any capital payment made by that person as consideration for the assignment.

(3) If the total of the amounts found under subsection (2) is equal to or greater than the capital sum, income tax is not charged under section 681DD in respect of the capital sum.

(4) If the total of those amounts is less than the capital sum, in applying section 681DD(4) that total must be deducted from the capital sum.

(5) If the capital sum is the consideration for part only of the lessee's interest in the lease—

(a) any amount found under subsection (2) (and still unallowed) must be reduced to a just and reasonable proportion of it, and

(b) in calculating that proportion account must be taken of the degree to which the payments mentioned in subsection (2) have contributed to the value of what is disposed of in return for the capital sum.

(6) Subsection (7) applies if—

(a) more than one capital sum is (or is treated as) obtained by the same person in respect of the lessee's interest in the lease, and

(b) in arriving at a total under subsection (2) a payment is taken into account in respect of one of the capital sums.

(7) So far as the payment is so taken into account it must not be taken into account in applying subsection (2) to another of the capital sums.

(8) The order in which subsections (6) and (7) are applied is the order in which capital sums are obtained.

(9) If the capital sum is obtained by the personal representatives of a deceased person, the reference in subsection (2)(a) to any payment made under the lease by the person obtaining the capital sum includes any payment made under the lease by the deceased.

681DF

(1) This section applies if a capital sum is obtained as mentioned in section 681DC and later a payment is made as mentioned in section 681DB.

(2) Adjustments must be made if they are needed to give effect to a charge to income tax under section 681DD in respect of the capital sum.

(3) An adjustment may be made within the period ending with the fifth anniversary of the 31 January following the tax year in which the payment is made.

(4) Subsection (3) applies despite any time limit specified in the Income Tax Acts.

Obtaining of sum

681DG

A reference in this Chapter to a sum obtained in respect of an interest in an asset (whether the lessee's interest in a lease of the asset or the lessor's interest or any other interest) includes a reference to—

(a) insurance money obtained in respect of the interest, and

(b) sums representing money or money's worth obtained in respect of the interest by a transaction or series of transactions disposing of it.

681DH

(1) This section applies to a reference in this Chapter to a sum obtained in respect of the lessee's interest in a lease of an asset.

(2) The reference includes a reference to sums representing the consideration in money or money's worth obtained on any of the following occasions—

(a) a surrender of the interest to the lessor,

(b) an assignment of the lease, and

(3) The reference also includes a reference to sums representing money or money's worth obtained in respect of the interest by a transaction or series of transactions under which the lessee's rights are merged in any way with the lessor's rights or with any other rights as respects the asset.

(4) Subsection (3) applies so far as the money or money's worth is attributable to the lessee's rights under the lease.

681DI

(1) This section applies for the purposes of this Chapter if a person disposes of an interest in an asset to a person who is the first person's associate (and the interest may be the lessee's interest in a lease of the asset or the lessor's interest or any other interest).

(2) The person disposing of the interest must be treated as obtaining in respect of it the greatest of—

(a) the sum in fact obtained by the person,

(b) the value of the interest in the open market, and

(3) The disposal—

(a) may be direct or indirect, and

(b) may be effected by a transaction or series of transactions described in section 681DG(b) or 681DH(3).

Apportionment

681DJ

(1) This section applies for the purposes of this Chapter.

(2) Subsection (3) applies if—

(a) a payment is made,

(b) it is one for which a deduction by way of relevant tax relief is allowed, and

(3) The payment must be apportioned in a manner which is just and reasonable.

(4) Subsection (5) applies if—

(a) a sum is obtained in respect of an interest in an asset,

(b) the sum is obtained by persons carrying on a trade or profession in partnership, and

(5) The sum must be apportioned between the partners in the shares in which they are entitled to the profits of the trade or profession at the time the sum is obtained.

(6) Subsection (7) applies if—

(a) a sum is obtained in respect of an interest in an asset, and

(b) the sum is obtained by persons jointly entitled to the interest.

(7) The sum must be apportioned according to their respective rights in the interest.

(8) Subsections (6) and (7) are subject to subsections (4) and (5).

681DK

(1) Subsections (2) and (3) apply if—

(a) a payment or sum is to be apportioned under section 681DJ or under section 880 of CTA 2010,

(b) at the time of the apportionment it appears that it is material to the liability to tax (whether income tax or corporation tax, and for whatever period) of two or more persons (in this section referred to collectively as “the set”),

(d) at the time of the apportionment, it appears that the apportionment is material to the income tax liability (for whatever period) of—

(i) a person, or some two or more persons, in the set, or

(ii) all the persons in the set.

(2) For the purposes of income tax of the person or persons mentioned in subsection (1)(d), the question is to be determined in the same way as an appeal.

(3) All the persons in the set are entitled to be a party to the proceedings.

Interpretation

681DL

(1) This section applies for the purposes of this Chapter.

(2) Persons are associates if they are associated with each other.

(3) The following are associated with each other—

(a) an individual and the individual's spouse or civil partner or relative,

(b) an individual and a spouse or civil partner of a relative of the individual,

(d) an individual and a spouse or civil partner of a relative of the individual's spouse or civil partner.

(4) The following are associated with each other—

(a) a person as trustee of a settlement and an individual who (in relation to the settlement) is a settlor,

(b) a person as trustee of a settlement and a person associated with an individual who (in relation to the settlement) is a settlor.

(5) The following are associated with each other—

(a) a person and a body of persons of which the person has control,

(b) a person and a body of persons of which persons associated with the person have control,

(d) two or more bodies of persons associated with the same person under paragraphs (a) to (c).

(6) In relation to a disposal by joint owners, the joint owners and any person associated with any of them are associated with each other.

(7) For the purposes of this section—

(a) a relative is a brother, sister, ancestor or lineal descendant,

(b) a body of persons includes a partnership, and

681DM

For the purposes of this Chapter a capital sum is any sum of money, or any money's worth, except so far as it or any part of it—

(a) is to be treated for income tax purposes as a receipt to be taken into account in calculating the profits or losses of a trade, profession or vocation, or

(b) is (apart from this Chapter) chargeable to income tax under or by virtue of any provision to which section 1016 applies.

681DN

(1) This section applies for the purposes of this Chapter.

(2) A lease is (in relation to an asset) an agreement or arrangement under which payments are made for the use of or otherwise in respect of the asset.

(3) In particular it includes an agreement or arrangement under which the payments (or any of them) represent instalments of a purchase price or payments towards it.

681DO

For the purposes of this Chapter a relevant asset is any description of property or rights other than land or an interest in land.

681DP

For the purposes of this Chapter each of the following is a deduction by way of relevant tax relief—

(a) a deduction in calculating profits or losses of a trade for corporation tax purposes,

(b) a deduction in calculating any loss for which relief is given under section 91 of CTA 2010 (losses from miscellaneous transactions), or in calculating profits or gains chargeable to corporation tax under or by virtue of any provision to which section 1173 of CTA 2010 applies (miscellaneous charges),

(c) a deduction of an amount which for the purposes of section 73 of FA 2012 is adjusted BLAGAB management expenses of an insurance company for an accounting period,

(d) a deduction under section 1219 of CTA 2009 (expenses of management of a company's investment business),

(e) a deduction in calculating profits or losses of a trade, profession or vocation for income tax purposes,

(f) a deduction in calculating any loss for which relief is allowed under section 152 (losses from miscellaneous transactions), or in calculating profits or other income or gains chargeable to income tax under or by virtue of any provision to which section 1016 applies, and

(g) a deduction from earnings allowed under section 336 of ITEPA 2003 (expenses) or allowed in calculating losses in an employment for income tax purposes.

Chapter 5B — Finance arrangements

Type 1 arrangements

809BZA

(1) For the purposes of this Chapter an arrangement is a type 1 finance arrangement if conditions A and B are met.

(2) Condition A is that under the arrangement—

(a) a person (“the borrower”) receives money or another asset (“the advance”) from another person (“the lender”),

(b) the borrower or a person connected with the borrower makes a disposal of an asset (“the security”) to or for the benefit of the lender or a person connected with the lender, and

(2A) For the purposes of subsection (2)(c) it does not matter if an entitlement of the lender or a person connected with the lender is subject to any condition.

(3) Condition B is that in accordance with generally accepted accounting practice—

(a) the borrower's accounts for the period in which the advance is received record a financial liability in respect of it, and

(b) the payments reduce the amount of the financial liability.

(4) If the borrower is a partnership the reference to the borrower's accounts includes a reference to the accounts of any member of the partnership.

(5) For the purposes of this section the borrower and the lender are not connected with one another.

809BZB

(1) This section applies if a type 1 finance arrangement would have the relevant effect (ignoring this section).

(2) The arrangement is not to have that effect.

(3) The relevant effect is that—

(a) an amount of income on which the borrower or a person connected with the borrower would otherwise have been charged to income tax is not so charged,

(b) an amount which would otherwise have been brought into account in calculating for income tax purposes any income of the borrower or of a person connected with the borrower is not so brought into account, or

(4) But if the borrower is a partnership the relevant effect is that—

(a) an amount of income on which a member of the partnership would otherwise have been charged to income tax is not so charged,

(b) an amount which would otherwise have been brought into account in calculating for income tax purposes any income of a member of the partnership is not so brought into account, or

(5) For the purposes of this section the borrower and the lender are not connected with one another.

(6) An income deduction is—

(a) a deduction in calculating income for income tax purposes, or

(b) a deduction from total income.

809BZC

(1) This section applies if—

(a) a type 1 finance arrangement would not have the relevant effect (ignoring section 809BZB(2)),

(b) that arrangement would not have the corresponding corporation-tax effect (ignoring section 759(2) of CTA 2010), and

(i) within the charge to income tax, or

(ii) a partnership at least one member of which is within the charge to income tax.

(2) The payments mentioned in section 809BZA(2)(c) must be treated for income tax purposes as income of the borrower payable in respect of the security.

(3) Subsection (2) applies whether or not the payments are also the income of another person for tax purposes.

(4) Subsections (3) to (6) of section 809BZB (meaning of relevant effect) apply for the purposes of this section as for those of that.

(5) In subsection (1)(b) “the corresponding corporation-tax effect” means the relevant effect as defined by section 759(3) to (6) of CTA 2010 (provision for corporation tax corresponding to section 809BZB(3) to (6)).

809BZD

(1) This section applies if—

(a) there is a type 1 finance arrangement,

(b) the borrower is not a partnership,

(c) the arrangement is prevented by section 809BZB from having the relevant effect in relation to the borrower, or section 809BZC applies to the borrower, and

(d) in accordance with generally accepted accounting practice the borrower's accounts record an amount as a finance charge in respect of the advance.

(2) For income tax purposes the borrower may treat the amount as interest payable on a loan.

(3) If an amount is treated as interest (“deemed interest”) under subsection (2), to find out when it is paid—

(a) treat the payments mentioned in section 809BZA(2)(c) 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

809BZE

(1) This section applies if each of conditions A to C is met.

(2) Condition A is that—

(a) there is a type 1 finance arrangement, and

(b) the borrower is a partnership.

(3) Condition B is that—

(a) the arrangement is prevented by section 809BZB from having the relevant effect in relation to a person who is a member of the partnership, or

(b) section 809BZC applies to the partnership (in which event “the person” in subsections (4) and (5) means the person within the charge to income tax who is a member of the partnership).

(4) Condition C is that in accordance with generally accepted accounting practice the person's accounts, or the partnership's accounts, record an amount as a finance charge in respect of the advance.

(5) For income tax purposes the person may treat the amount as interest payable by the partnership on a loan.

(6) If an amount is treated as interest (“deemed interest”) under subsection (5), to find out when it is paid—

(a) treat the payments mentioned in section 809BZA(2)(c) 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

Type 2 arrangements

809BZF

(1) For the purposes of this Chapter an arrangement is a type 2 finance arrangement if conditions A and B are met.

(2) Condition A is that—

(a) under the arrangement a person (“the transferor”) makes a disposal of an asset (“the security”) to a partnership,

(b) the transferor or a person connected with the transferor is a member of the partnership immediately after the disposal (whether or not a member immediately before it),

(c) under the arrangement the partnership receives money or another asset (“the advance”) from another person (“the lender”),

(d) there is a relevant change in relation to the partnership (see section 809BZG), and

(e) under the arrangement the share in the partnership's profits of the person involved in the change is determined by reference (wholly or partly) to payments in respect of the security.

(2A) For the purposes of subsection (2)(e) it does not matter if any determination of the share in the partnership's profits of the person involved in the relevant change as mentioned is subject to any condition.

(3) Condition B is that in accordance with generally accepted accounting practice—

(a) the partnership's accounts for the period in which the advance is received record a financial liability in respect of it, and

(b) the payments reduce the amount of the financial liability.

(4) The reference to the partnership's accounts includes a reference to the transferor's accounts.

809BZG

(1) For the purposes of this Chapter there is a relevant change in relation to a partnership if condition A or condition B is met.

(2) Condition A is that in connection with the arrangement the lender or a person connected with the lender becomes a member of the partnership at any time.

(3) Condition B is that—

(a) in connection with the arrangement there is at any time a change in a member's share in the partnership's profits, and

(b) the member is the lender or a person connected with the lender or a person who in connection with the arrangement becomes at any time connected with the lender.

(4) An event occurs in connection with the arrangement if it occurs directly or indirectly in consequence of it or otherwise in connection with it.

(5) If there is a relevant change in relation to a partnership, a reference in this Chapter to the person involved in the change is—

(a) if it is condition A that is met, to the person who becomes a member of the partnership, and

(b) if it is condition B that is met, to the member of the partnership in whose share in the partnership's profits there is a change.

809BZH

(1) This section applies if—

(a) there is a type 2 finance arrangement, and

(b) any relevant change in relation to the partnership would have the relevant effect (ignoring this section).

(2) In such a case—

(a) Part 9 of ITTOIA 2005 (partnerships) is to have effect in relation to the transferor or the person connected with the transferor as if the relevant change in relation to the partnership had not occurred, and

(b) accordingly the finance arrangement is not to have the relevant effect.

(3) The relevant effect is that—

(a) an amount of income on which the transferor or the person connected with the transferor would otherwise have been charged to income tax is not so charged,

(b) an amount which would otherwise have been brought into account in calculating for income tax purposes any income of the transferor or the person connected with the transferor is not so brought into account, or

(4) In deciding whether subsection (1)(b) is met assume that amounts of income equal to the payments mentioned in section 809BZF(2)(e) were payable to the partnership before the relevant change in relation to it occurred.

(5) An income deduction is—

(a) a deduction in calculating income for income tax purposes, or

(b) a deduction from total income.

809BZI

(1) This section applies if—

(a) there is a type 2 finance arrangement,

(b) the transferor is a person within the charge to income tax, and

(c) in accordance with generally accepted accounting practice the partnership's accounts record an amount as a finance charge in respect of the advance.

(2) For income tax purposes the transferor may treat the amount as interest payable by the transferor on a loan.

(3) The reference in subsection (1) to the partnership's accounts includes a reference to the transferor's accounts.

(4) If an amount is treated as interest (“deemed interest”) under subsection (2), to find out when it is paid—

(a) treat the payments mentioned in section 809BZF(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

Type 3 arrangements

809BZJ

(1) For the purposes of this Chapter an arrangement is a type 3 finance arrangement if conditions A and B are met.

(2) Condition A is that—

(a) a partnership holds an asset (“the security”) as a partnership asset at any time before the arrangement is made,

(b) under the arrangement the partnership receives money or another asset (“the advance”) from another person (“the lender”),

(d) under the arrangement the share in the partnership's profits of the person involved in the change is determined by reference (wholly or partly) to payments in respect of the security.

(2A) For the purposes of subsection (2)(d) it does not matter if any determination of the share in the partnership's profits of the person involved in the relevant change as mentioned is subject to any condition.

(3) Condition B is that in accordance with generally accepted accounting practice—

(a) the partnership's accounts for the period in which the advance is received record a financial liability in respect of it, and

(b) the payments reduce the amount of the financial liability.

(4) The reference to the partnership's accounts includes a reference to the accounts of any person who is a member of the partnership immediately before the arrangement is made.

809BZK

(1) This section applies if—

(a) there is a type 3 finance arrangement, and

(b) any relevant change in relation to the partnership would have the relevant effect (ignoring this section).

(2) The relevant effect is that—

(a) an amount of income on which a relevant member would otherwise have been charged to income tax is not so charged,

(b) an amount which would otherwise have been brought into account in calculating for income tax purposes any income of a relevant member is not so brought into account, or

(3) A relevant member is a person who—

(a) was a member of the partnership immediately before the relevant change in relation to it occurred, and

(b) is not the lender.

(4) If this section applies—

(a) Part 9 of ITTOIA 2005 (partnerships) is to have effect in relation to any relevant member as if the relevant change in relation to the partnership had not occurred, and

(b) accordingly the finance arrangement is not to have the relevant effect.

(5) In deciding whether subsection (1)(b) is met assume that amounts of income equal to the payments mentioned in section 809BZJ(2)(d) were payable to the partnership before the relevant change in relation to it occurred.

(6) An income deduction is—

(a) a deduction in calculating income for income tax purposes, or

(b) a deduction from total income.

809BZL

(1) This section applies if—

(a) there is a type 3 finance arrangement,

(b) a relevant member is a person within the charge to income tax, and

(c) in accordance with generally accepted accounting practice the partnership's accounts record an amount as a finance charge in respect of the advance.

(2) For income tax purposes the relevant member may treat the amount as interest payable by the partnership on a loan.

(3) The reference in subsection (1) to the partnership's accounts includes a reference to the accounts of any relevant member.

(4) If an amount is treated as interest (“deemed interest”) under subsection (2), to find out when it is paid—

(a) treat the payments mentioned in section 809BZJ(2)(d) 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

(5) A relevant member is a person who—

(a) was a member of the partnership immediately before the relevant change in relation to it occurred, and

(b) is not the lender.

Exceptions

809BZM

(1) Sections 809BZN to 809BZP make provision for finance arrangement codes not to apply in certain circumstances.

(2) For the purposes of those sections each of the following groups of provisions is a finance arrangement code—

(a) sections 809BZA to 809BZE (type 1 arrangements),

(b) sections 809BZF to 809BZI (type 2 arrangements), and

809BZN

(1) A finance arrangement code does not apply if the whole of the advance under the arrangement—

(a) is charged to tax on a relevant person as an amount of income,

(b) is brought into account in calculating for tax purposes any income of a relevant person, or

(c) is brought into account for the purposes of any provision of CAA 2001 as a disposal receipt, or proceeds from a balancing event or disposal event, of a relevant person.

(2) Treat subsection (1)(c) as not met if—

(a) the receipt gives rise, or proceeds give rise, to a balancing charge, and

(b) the amount of the balancing charge is limited by any provision of CAA 2001.

(3) A finance arrangement code does not apply if at all times the whole of the advance under the arrangement—

(a) is a debtor relationship of a relevant person for the purposes of Part 5 of CTA 2009 (loan relationships), or

(b) would be a debtor relationship of a relevant person for those purposes if that person were a company within the charge to corporation tax.

(4) In subsection (3) references to a debtor relationship do not include references to a relationship to which Chapter 2 of Part 6 of CTA 2009 applies (relevant non-lending relationships).

(5) A finance arrangement code does not apply so far as—

(a) section 263A of TCGA 1992 applies in relation to the arrangement (agreements for sale and repurchase of securities), or

(b) Schedule 13 to FA 2007 or Chapter 10 of Part 6 of CTA 2009 applies in relation to the arrangement (sale and repurchase of securities, and repos).

(6) A finance arrangement code does not apply so far as Part 10A of this Act, Chapter 4 of Part 4 of TCGA 1992 or Chapter 6 of Part 6 of CTA 2009 has effect in relation to the arrangement (alternative finance arrangements).

(7) A finance arrangement code does not apply so far as the security is plant or machinery which is the subject of a sale and finance leaseback.

(8) For the purposes of subsection (7) apply section 221 of CAA 2001 to determine whether plant or machinery is the subject of a sale and finance leaseback.

(9) A finance arrangement code does not apply so far as sections 228B and 228C of CAA 2001 (finance leaseback) apply in relation to the arrangement.

(9A) A finance arrangement code does not apply if the arrangement is a right-of-use lease—

(a) under which the relevant person is a lessee, and

(b) which, were that person required under generally accepted accounting practice to determine whether the lease falls to be treated in the accounts of that person as a finance lease or loan, would not fall to be so treated.

(9B) In subsection (9A) “right-of-use lease” has the same meaning as in Part 2 of CAA 2001 (see section 70YI(1) of that Act).

(10) Section 809BZO defines a relevant person for the purposes of this section.

809BZO

(1) This section defines a relevant person for the purposes of section 809BZN.

(2) If (apart from sections 809BZN and 809BZP) sections 809BZA to 809BZE would apply, each of the following is a relevant person—

(a) the borrower, and

(b) a person connected with the borrower or (if the borrower is a partnership) a member of the partnership.

(3) If (apart from sections 809BZN and 809BZP) sections 809BZF to 809BZI would apply, the transferor is a relevant person.

(4) If (apart from sections 809BZN and 809BZP) sections 809BZJ to 809BZL would apply, a relevant member as there defined is a relevant person.

(5) For the purposes of subsection (2)(b) the persons connected with the borrower include any persons who under section 993 (meaning of “connected”) are connected with the borrower.

809BZP

(1) The Treasury may make regulations prescribing other circumstances in which a finance arrangement code is not to apply.

(2) The regulations may amend sections 809BZN and 809BZO.

(3) The power to make regulations includes—

(a) power to make provision that has effect in relation to times before the making of the regulations (but not times before 6 June 2006),

(b) power to make different provision for different cases or different purposes, and

Supplementary

809BZQ

(1) This section applies for the purposes of this Chapter.

(2) A reference to the accounts of a person includes (if the person is a company) a reference to the consolidated group accounts of a group of companies of which it is a member.

(3) In determining whether accounts record an amount as a financial liability in respect of an advance, assume that the period in which the advance is received ended immediately after the receipt of the advance.

(4) If a person does not draw up accounts in accordance with generally accepted accounting practice, assume that the person drew up the accounts in accordance with that practice.

809BZR

A reference in this Chapter to an arrangement includes a reference to an agreement or understanding (whether or not legally enforceable).

809BZS

(1) This section applies for the purposes of this Chapter.

(2) A reference to a person receiving an asset includes—

(a) a reference to the person obtaining (directly or indirectly) the value of an asset or otherwise deriving (directly or indirectly) a benefit from it, and

(b) a reference to the discharge (in whole or part) of a liability of the person.

(3) A reference to a disposal of an asset includes a reference to anything constituting a disposal of it for the purposes of TCGA 1992.

(4) A reference to payments in respect of an asset includes—

(a) a reference to payments in respect of another asset substituted for it under the arrangement, and

(b) a reference to obtaining (directly or indirectly) the value of an asset or otherwise deriving (directly or indirectly) a benefit from it.

Chapter 5C — Loan or credit transactions

809CZA

(1) This section defines a loan or credit transaction for the purposes of sections 809CZB and 809CZC.

(2) A transaction is a loan or credit transaction if it is—

(a) effected with reference to the lending of money or the varying of the terms on which money is lent, or

(b) effected with a view to enabling or facilitating an arrangement concerning the lending of money or the varying of the terms on which money is lent.

(3) A transaction is a loan or credit transaction if it is—

(a) effected with reference to the giving of credit or the varying of the terms on which credit is given, or

(b) effected with a view to enabling or facilitating an arrangement concerning the giving of credit or the varying of the terms on which credit is given.

(4) Subsection (2) has effect whether the transaction is effected—

(a) between the lender and borrower,

(b) between either of them and a person connected with the other, or

(5) Subsection (3) has effect whether the transaction is effected—

(a) between the creditor and debtor,

(b) between either of them and a person connected with the other, or

809CZB

(1) This section applies if a loan or credit transaction provides for a payment which is not interest but is—

(a) an annuity or other annual payment falling within Part 5 of ITTOIA 2005 and chargeable to income tax otherwise than as relevant foreign income, or

(b) an annuity or other annual payment which is from a source in the United Kingdom and chargeable to corporation tax under Chapter 7 of Part 10 of CTA 2009 (annual payments not otherwise charged) or regulation 15 of the Unauthorised Unit Trusts (Tax) Regulations 2013.

(2) The payment must be treated for the purposes of the Income Tax Acts as if it were a payment of yearly interest (see, in particular, section 874).

809CZC

(1) This section applies if—

(a) under a loan or credit transaction a person transfers income arising from property,

(b) the person is not, as a result of Chapter 5B (finance arrangements), chargeable to income tax on the income transferred, and

(2) In such a case—

(a) income tax is charged under this section,

(b) the tax is charged on an amount equal to the full amount of the income transferred,

(d) the person who transfers the income is liable for the tax.

(3) This section does not prejudice the liability of any other person to tax.

(4) For the purposes of this section a person transfers income if the person surrenders, waives or forgoes it.

(5) Subsection (6) applies for the purposes of this section if—

(a) credit is given for the purchase price of property, and

(b) the rights attaching to the property are such that the buyer's rights to income from the property are suspended or restricted during the life of the debt.

(6) The buyer must be treated as surrendering income of an amount equal to the income the buyer in effect forgoes by obtaining the credit.

(7) For the purposes of this section an amount of income payable subject to deduction of income tax must be taken as the amount before deduction of tax.

809ZE

(1) This section gives the meaning of “capital payment”, “relevant capital payment” and references to payment for the purposes of sections 809ZA to 809ZD and this section.

(2) “Capital payment” means any payment except one which, if made to the lessor—

(a) would fall to be included in a calculation of the lessor's income for income tax purposes, or

(b) would so fall but for section 148A of ITTOIA 2005 (rental earnings under long funding finance lease).

(3) A capital payment, in relation to a lease or relevant arrangement, is “relevant” if condition A or B is met (but this is subject to subsections (6) and (7)).

(4) Condition A is that the capital payment is payable (or paid), directly or indirectly, by or on behalf of the lessee to the lessor or another person on the lessor's behalf in connection with—

(a) the grant, assignment, novation or termination of the lease, or

(b) any provision of the lease or relevant arrangement (including the variation or waiver of any such provision).

(5) Condition B is that rentals payable under the lease are less than, or payable later than, they might reasonably be expected to be if there were no obligation to make the capital payment and it were not made.

(6) A capital payment is not “relevant” so far as it—

(a) reduces the amount of expenditure incurred by the lessor for the purposes of CAA 2001 in respect of the plant or machinery in question or would reduce it but for section 536 of that Act (contributions not made by public bodies and not eligible for tax relief), or

(b) is compensation for loss resulting from damage to, or damage caused by, the plant or machinery in question.

(7) If—

(a) a capital payment is an initial payment under a long funding lease for the purposes of Part 2 of CAA 2001 (see section 70YI of that Act), and

(b) under section 61 of that Act (disposal events and disposal values) the commencement of the term of the lease (as defined in section 70YI of that Act) is an event that requires the lessor to bring a disposal value into account,

the capital payment is only “relevant” so far as it exceeds the amount that is the disposal value for the purposes of Part 2 of that Act.

(8) References to payment include the provision of value by any means other than the making of a payment.

(9) Accordingly—

(a) references to the making of a payment include the passing of value by any other means, and

(b) references to the amount of the payment include the value passed.

809ZF

(1) This section applies for the purposes of sections 809ZA to 809ZE and this section.

(2) “Lease” includes—

(a) a licence, and

(b) the letting of a ship or aircraft on charter or the letting of any other asset on hire,

and “lessor” and “lessee” must be read accordingly.

(3) “Lease of plant or machinery” includes a lease of plant or machinery and other property, but does not include a lease to which subsection (4) or (5) applies.

(4) This subsection applies to a lease if any income attributable to it and received by the lessor would be chargeable to tax under Part 3 of ITTOIA 2005 (property income).

(5) This subsection applies to a lease of plant or machinery if the lessor has incurred on the plant or machinery what would be qualifying expenditure within the meaning of Part 2 of CAA 2001 but for section 34A of that Act (expenditure on plant or machinery for long funding leasing not qualifying expenditure).

(6) “Relevant arrangement” means any agreement or arrangement relating to a lease of plant or machinery, including one made before the lease is entered into or after it has ended.

(7) Accordingly, “lessor” and “lessee” include prospective and former lessors and lessees.

Chapter 7 — Avoidance involving obtaining tax relief for interest

809ZG

(1) Relief is not to be given under any provision of the Income Tax Acts to a person in respect of a payment of interest if a tax relief scheme has been effected, or tax relief arrangements have been made, in relation to the transaction under which the interest is paid.

(2) Subsection (1) applies whether the tax relief scheme is effected, or the tax relief arrangements are made, before or after the transaction.

(3) A scheme is a tax relief scheme in relation to a transaction for the purposes of subsection (1) if it is such that the sole or main benefit that might be expected to accrue to the person from the transaction is the obtaining of a reduction in tax liability by means of relief under the Income Tax Acts.

(4) Arrangements are tax relief arrangements in relation to a transaction for the purposes of subsection (1) if they are such that the sole or main benefit that might be expected to accrue to the person from the transaction is the obtaining of a reduction in tax liability by means of relief under the Income Tax Acts.

(5) In this section “relief” means relief by way of—

(a) deduction in calculating profits or gains, or

(b) deduction or set off against income.

Chapter 2A — Domicile

835B

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 2B — UK representative of non-UK resident

Introduction

835C

(1) This Chapter provides for a branch or agency to be treated as the UK representative of a non-UK resident in respect of certain amounts chargeable to income tax.

(2) For obligations and liabilities in relation to income tax imposed on a branch or agency which under this Chapter is treated as the UK representative of a non-UK resident, see Chapter 2C.

835D

This Chapter does not apply in relation to income tax chargeable on income of a company otherwise than as a trustee.

Branches and agencies

835E

(1) This section applies if a non-UK resident carries on (alone or in partnership) any trade, profession or vocation through a branch or agency in the United Kingdom.

(2) The branch or agency is the UK representative of the non-UK resident in relation to—

(a) the amount of any income from the trade, profession or vocation that arises (directly or indirectly) through or from the branch or agency, and

(b) the amount of any income from property or rights which are used by, or held by or for, the branch or agency.

(3) The following rules are to be applied for the purposes of subsection (2) and Chapter 2C in relation to an amount within that subsection.

Rule 1 The UK representative continues to be the UK representative of the non-UK resident in relation to the amount even after ceasing to be a branch or agency through which the non-UK resident carries on the trade, profession or vocation concerned.

Rule 2 The UK representative is treated in relation to the amount as a distinct and separate person from the non-UK resident (if the representative would not otherwise be so treated).

Rule 3 If the branch or agency is carried on by persons in partnership, the partnership, as such, is treated in relation to the amount as the UK representative of the non-UK resident.

(4) For further rules that apply where a trade or profession carried on by a non-UK resident in the United Kingdom is carried on in partnership, see section 835F.

(5) This section needs to be read with sections 835G to 835K (which provide for descriptions of persons who are not to be regarded as the UK representative of a non-UK resident if certain conditions are met).

835F

(1) Subsection (2) applies if a trade or profession carried on by a non-UK resident through a branch or agency in the United Kingdom is carried on by the non-UK resident in partnership.

(2) The trade or profession carried on through the branch or agency is, for the purposes of section 835E and Chapter 2C, to be treated as including the notional trade or profession.

(3) Subsection (4) applies (in addition to subsection (2) if that subsection also applies) if—

(a) a trade or profession carried on by a non-UK resident in the United Kingdom is carried on by the non-UK resident in partnership, and

(b) any member of the partnership is resident in the United Kingdom.

(4) The notional trade or profession is, for the purposes of section 835E and Chapter 2C, to be treated as being a trade carried on in the United Kingdom through the partnership as such.

(5) In this section “the notional trade or profession” means the notional trade from which the non-UK resident's share in the partnership's profits or losses is treated for the purposes of section 852 of ITTOIA 2005 as deriving.

Persons who are not UK representatives

835G

(1) This section applies if a non-UK resident carries on (alone or in partnership) a business through an agent in the United Kingdom.

(2) The agent is not the UK representative of the non-UK resident in relation to an amount within section 835E(2) arising to the non-UK resident from—

(a) so much of the non-UK resident's business as relates to disregarded transactions, or

(b) property or rights which, as a result of disregarded transactions, are used by, or held by or for, the agent on behalf of the non-UK resident.

(3) “Disregarded transactions” are transactions—

(a) carried out through the agent in the United Kingdom, and

(b) in respect of which the agent does not act in the course of carrying on a regular agency for the non-UK resident.

835H

(1) This section applies if a non-UK resident carries on (alone or in partnership) a business through a broker in the United Kingdom.

(2) The broker is not the UK representative of the non-UK resident in relation to an amount within section 835E(2) if—

(a) the amount is transaction income in relation to a transaction carried out through the broker in the United Kingdom on behalf of the non-UK resident, and

(b) the independent broker conditions are met in relation to the transaction (see section 835L).

(3) In subsection (2) “transaction income”, in relation to a transaction carried out through a broker in the United Kingdom on behalf of a non-UK resident, has the same meaning as in Chapter 1 (see section 814(5)).

835I

(1) This section applies if a non-UK resident carries on (alone or in partnership) a business through an investment manager in the United Kingdom.

(2) The investment manager is not the UK representative of the non-UK resident in relation to an amount within section 835E(2) if—

(a) the amount is transaction income in relation to an investment transaction carried out through the investment manager in the United Kingdom on behalf of the non-UK resident, and

(b) the independent investment manager conditions are met in relation to the investment transaction (see section 835M).

(3) In subsection (2) “transaction income”, in relation to a transaction carried out through an investment manager in the United Kingdom on behalf of a non-UK resident, has the same meaning as in Chapter 1 (see section 814(5)).

835J

(1) Subsection (2) applies if an amount within section 835E(2) arising to a non-UK resident consists of alternative finance return.

(2) Neither of the following is the UK representative of the non-UK resident in relation to the amount—

(a) the other party to the alternative finance arrangements,

(b) any other person acting for the non-UK resident in relation to the alternative finance arrangements.

(3) In subsection (1) “alternative finance return” means alternative finance return within the application of section 564I, 564K or 564L(2) or (3).

(4) In subsection (2) the reference to “the alternative finance arrangements” is a reference to the alternative finance arrangements under which the alternative finance return mentioned in subsection (1) arises.

835K

(1) This section applies if—

(a) a non-UK resident (“X”) is a member of Lloyd's, and

(b) an amount within section 835E(2) arises to X from X's underwriting business.

(2) A person who has been X's members' agent or the managing agent of the syndicate in question is not the UK representative of X in relation to the amount or to matters connected with the amount.

(3) For the purposes of this section—

(a) X is a member of Lloyd's if X is a member within the meaning of Chapter 3 of Part 2 of FA 1993, and

(b) “members' agent” and “managing agent” are to be construed in accordance with section 184 of that Act.

The independent broker conditions

835L

(1) The independent broker conditions are met in relation to a transaction carried out on behalf of a non-UK resident by a broker in the United Kingdom if conditions A to D are met.

(2) Condition A is that at the time of the transaction the broker is carrying on the business of a broker.

(3) Condition B is that the transaction is carried out in the ordinary course of that business.

(4) Condition C is that the remuneration which the broker receives in respect of the transaction for the provision of the services of a broker to the non-UK resident is not less than is customary for that class of business.

(5) Condition D is that the broker does not fall (apart from this subsection) to be treated under this Chapter, or under Chapter 1 of Part 7A of TCGA 1992, as a UK representative of the non-UK resident in relation to any amounts that—

(a) are not included in transaction income in relation to the transaction (see section 835H(2) and (3)), and

(b) are chargeable to tax for the same tax year as that transaction income.

The independent investment manager conditions

835M

(1) The independent investment manager conditions are met in relation to an investment transaction carried out on behalf of a non-UK resident by an investment manager in the United Kingdom if conditions A to E are met.

(2) Condition A is that at the time of the transaction the investment manager is carrying on a business of providing investment management services.

(3) Condition B is that the transaction is carried out in the ordinary course of that business.

(4) Condition C is that, when the investment manager acts on behalf of the non-UK resident in relation to the transaction, the relationship between them, having regard to its legal, financial and commercial characteristics, is a relationship between persons carrying on independent businesses dealing with each other at arm's length.

(5) Condition D is that the requirements of the 20% rule are met (see section 835N).

(6) Condition E is that the remuneration which the investment manager receives in respect of the transaction for the provision of investment management services to the non-UK resident is not less than is customary for that class of business.

835N

(1) The requirements of the 20% rule are met if conditions A and B are met.

(2) Condition A is that, in relation to a qualifying period, it has been or is the intention of the investment manager and the persons connected with the investment manager that at least 80% of the non-UK resident's relevant disregarded income should consist of amounts to which none of them has a beneficial entitlement.

(3) Condition B is that, so far as there is a failure to fulfil that intention, that failure—

(a) is attributable (directly or indirectly) to matters outside the control of the investment manager and persons connected with the investment manager, and

(b) does not result from a failure by any of them to take such steps as may be reasonable for mitigating the effect of those matters in relation to the fulfilment of that intention.

835O

(1) This section applies for the purposes of this Chapter.

(2) A “qualifying period” means—

(a) the tax year in which the transaction income mentioned in section 835I(2) is chargeable to tax, or

(b) a period of not more than 5 years comprising two or more tax years including that one.

(3) The “relevant disregarded income” of the non-UK resident for a qualifying period is the total of the non-UK resident's income for the tax years comprised in the qualifying period which derives from investment transactions—

(a) carried out by the investment manager on the non-UK resident's behalf, and

(b) in relation to which the independent investment manager conditions are met, ignoring the requirements of the 20% rule.

(4) A person has a “beneficial entitlement” to relevant disregarded income if the person has or may acquire a beneficial entitlement that is, or would be, attributable to the relevant disregarded income as a result of having an interest or other rights mentioned in subsection (5).

(5) The interests and rights referred to in subsection (4) are—

(a) an interest (whether or not an interest giving a right to an immediate payment of a share in the profits or gains) in property in which the whole or any part of the relevant disregarded income is represented, or

(b) an interest in, or other rights in relation to, the non-UK resident.

835P

(1) This section applies in the case of an investment transaction in relation to which the independent investment manager conditions are met, except for the requirements of the 20% rule.

(2) This Chapter has effect as if the requirements of that rule were met in relation to the transaction, but only in relation to so much of the transaction income in relation to the transaction (see section 835I(2) and (3)) as does not represent an amount—

(a) which is relevant disregarded income of the non-UK resident, and

(b) to which the investment manager or a person connected with the investment manager has or has had any beneficial entitlement.

835Q

(1) This section applies if amounts arise or accrue to the non-UK resident as a participant in a collective investment scheme.

(2) It applies for the purposes of determining whether the requirements of the 20% rule are met in relation to a transaction carried out for the purposes of the scheme (so far as the transaction is one in respect of which amounts so arise or accrue).

(3) In applying this section make the following assumptions—

(a) that all the transactions carried out for the purposes of the scheme are carried out on behalf of a company (“the assumed company”) which is—

(i) constituted for the purposes of the scheme, and

(ii) non-UK resident, and

(b) that the participants do not have any rights in respect of the amounts arising or accruing in respect of those transactions, other than the rights which, if they held shares in the assumed company, would be their rights as shareholders.

(4) If the scheme is such that the assumed company would not be regarded for tax purposes as carrying on a trade in the United Kingdom in relation to the tax year in which the transaction income mentioned in section 835I(2) is chargeable to tax, the requirements of the 20% rule are treated as met in relation to a transaction carried out for the purposes of the scheme.

(5) If the scheme is such that the assumed company would be so regarded for tax purposes, sections 835N to 835P have effect in relation to a transaction carried out for the purposes of the scheme with the modifications in subsection (6).

(6) The modifications are—

(a) for references to the non-UK resident substitute references to the assumed company, and

(b) for references to the non-UK resident's relevant disregarded income for a qualifying period substitute references to the sum of the amounts that would, for tax years comprised in the qualifying period, be chargeable to tax on the assumed company as profits deriving from the transactions—

(i) carried out by the investment manager, and

(ii) assumed to be carried out on behalf of the company.

(7) In this section—

“collective investment scheme” has the meaning given by section 235 of FISMA 2000, and

“participant”, in relation to a collective investment scheme, is construed in accordance with that section.

Supplementary

835R

(1) For the purposes of this Chapter a person is to be regarded as carrying out a transaction on behalf of another if the person—

(a) undertakes the transaction, whether on behalf of or to the account of the other, or

(b) gives instructions for it to be so carried out by another.

(2) In the case of a person who acts as a broker or investment manager as part only of a business, this Chapter has effect as if that part were a separate business.

835S

(1) This section applies for the purposes of this Chapter.

(2) “Branch or agency” means any factorship, agency, receivership, branch or management.

(3) “Investment manager” has the same meaning as in Chapter 1 (see section 827).

(4) “Investment transaction” means any transaction of a description specified for the purposes of this section in regulations made by the Commissioners for Her Majesty's Revenue and Customs.

(5) Provision made in regulations under subsection (4) may, in particular, have effect in relation to the tax year current on the day on which the regulations are made.

Chapter 2C — Income tax obligations and liabilities imposed on UK representatives

835T

(1) This Chapter applies to the enactments relating to income tax so far as they make provision for or in connection with the assessment, collection and recovery of tax, or of interest on tax.

(2) Those enactments have effect in accordance with section 835U in relation to amounts in respect of which a branch or agency is to be treated as the UK representative of a non-UK resident under Chapter 2B.

(3) In this section “enactment” includes an enactment contained in subordinate legislation within the meaning of the Interpretation Act 1978.

835U

(1) The obligations and liabilities of a non-UK resident are to be treated, for the purposes of the enactments to which this Chapter applies, as if they were also the obligations and liabilities of the UK representative of the non-UK resident.

(2) Subsection (3) applies if—

(a) the UK representative of a non-UK resident discharges an obligation or liability imposed by this section that corresponds to one to which the non-UK resident is subject, or

(b) a non-UK resident discharges an obligation or liability that corresponds to one to which the non-UK resident's UK representative is subject by virtue of this section.

(3) The corresponding obligation or liability—

(a) of the non-UK resident (in a case within subsection (2)(a)), or

(b) of the UK representative (in a case within subsection (2)(b)),

is discharged.

(4) A non-UK resident is bound, as if they were the non-UK resident's own, by acts or omissions of the non-UK resident's UK representative in the discharge of the obligations and liabilities imposed on the representative by this section.

(5) This section is subject to sections 835V and 835W.

835V

(1) An obligation or liability attaching to a non-UK resident (“X”) by reason of a notice or other document having been given or served on X does not also attach to the UK representative of X by virtue of section 835U unless the notice or other document (or a copy of it) has been given to or served on the representative.

(2) An obligation or liability attaching to X by reason of a request or demand having been received by X does not also attach to the UK representative of X by virtue of section 835U unless the representative has been notified of the request or demand.

(3) Subsection (4) applies to obligations relating to the provision of information that are imposed on the UK representative of X by section 835U in a case where the representative is X's independent agent.

(4) The obligations do not require the UK representative to do anything except so far as it is practicable for the representative to do so.

(5) For this purpose, the representative must act to the best of the representative's knowledge and belief after taking all reasonable steps to obtain the necessary information.

(6) An obligation of X to provide information is not discharged by virtue of section 835U in a case where the UK representative of X has discharged the obligation only so far as required by subsection (4) of this section.

(7) X is not bound by virtue of section 835U by mistakes in information provided by the UK representative of X in discharging, so far as required under subsection (4) of this section, an obligation imposed on the representative by section 835U unless—

(a) the mistake is the result of an act or omission of X, or

(b) the mistake is one to which X consented or in which X connived.

(8) In this section “information” includes anything contained in a return, self-assessment, account, statement or report required to be provided to the Commissioners for Her Majesty's Revenue and Customs or to any officer of Revenue and Customs.

835W

(1) A person is not by virtue of section 835U liable to be proceeded against for a criminal offence unless the person—

(a) committed the offence, or

(b) consented to or connived in its commission.

(2) An independent agent of a non-UK resident is not by virtue of section 835U liable to any civil penalty or surcharge in respect of an act or omission if conditions A and B are met.

(3) Condition A is that the act or omission is not—

(a) an act or omission of the independent agent, or

(b) an act or omission to which the agent consented or in which the agent connived.

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