Taxation (International and Other Provisions) Act 2010

(225A) (1) In this Chapter “oil extraction activities” means activities within any of subsections (2) to (5) (but see also section 225M(6)). (2) Activities of a person in searching for oil in the United Kingdom or a designated area or causing such searching to be carried out for that person. (3) Activities of a person in extracting, or causing to be extracted for that person, oil at any place in the United Kingdom or a designated area under rights which— (a) authorise the extraction, and (b) are held by that person. (4) Activities of a person in transporting, or causing to be transported for that person, oil extracted at any such place not on dry land under rights which— (a) authorise the extraction, and (b) are held by that person, if the transportation meets condition A or B (see subsections (6) and (7)). (5) Activities of a person in effecting, or causing to be effected for that person, the initial treatment or initial storage of oil won from any oil field under rights which— (a) authorise its extraction, and (b) are held by that person. (6) Condition A is that the transportation is to the place where the oil is first landed in the United Kingdom. (7) Condition B is that the transportation— (a) is to the place in the United Kingdom, or (b) in the case of oil first landed in another country, is to the place in that or any other country (other than the United Kingdom), at which the seller in a sale at arm's length could reasonably be expected to deliver it (or, if there is more than one such place, the one nearest to the place of extraction). (8) The definition of “initial storage” in section 12(1) of OTA 1975 applies for the purposes of this section. (9) But in its application for those purposes in relation to the person mentioned in subsection (5) and to oil won from any one oil field, that definition is to have effect as if the reference to the maximum daily production rate of oil for the field mentioned in that definition were to a share of that maximum daily production rate proportionate to that person's share of the oil won from that field. (10) In this section “initial treatment” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act). (225B) In this Chapter “oil rights” means— (a) rights to oil to be extracted at any place in the United Kingdom or a designated area, or (b) rights to interests in or to the benefit of such oil. (225C) In this Chapter “ring fence income” means income arising from oil extraction activities or oil rights. (225D) In this Chapter “ring fence trade” means activities which— (a) are within the definition of “oil-related activities” in section 16(2) (oil extraction and related activities), and (b) constitute a separate trade (whether because of section 16(1) or otherwise). (225E) In this Chapter— - “chargeable period” has the same meaning as in Part 1 of OTA 1975 (see section 1(3) of that Act), - “designated area” means an area designated by Order in Council under section 1(7) of the Continental Shelf Act 1964, - “oil” means any substance won or capable of being won under the authority of a licence granted under Part 1 of the Petroleum Act 1998 or the Petroleum (Production) Act (Northern Ireland) 1964 (c. 28 (N.I.)), other than methane gas won in the course of operations for making and keeping mines safe, - “oil field” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act), - “OTA 1975” means the Oil Taxation Act 1975, and - “participator” has the same meaning as in Part 1 of OTA 1975 (see section 12(1) of that Act). (225F) (1) This section applies if a person disposes of oil in circumstances such that the market value of the oil— (a) falls to be taken into account under section 2 of OTA 1975, otherwise than by virtue of paragraph 6 of Schedule 3 to that Act, in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to that person in a chargeable period from an oil field, or (b) would so fall but for section 10 of that Act. (2) For income tax purposes, the disposal of the oil, and its acquisition by the person to whom it was disposed of, are to be treated as having been for a consideration equal to the market value of the oil— (a) as so taken into account under section 2 of that Act, or (b) as would have been so taken into account under that section but for section 10 of that Act. (225G) (1) This section applies if conditions A, B and C are met. (2) Condition A is that a person disposes of oil acquired by the person— (a) in the course of oil extraction activities carried on by the person, or (b) as a result of oil rights held by the person. (3) Condition B is that the disposal is not a sale at arm's length (as defined in paragraph 1 of Schedule 3 to OTA 1975). (4) Condition C is that section 225F does not apply in relation to the disposal. (5) For income tax purposes, the disposal of the oil, and its acquisition by the person to whom it was disposed of, are to be treated as having been for a consideration equal to the market value of the oil. (6) Paragraphs 2 and 3A of Schedule 3 to OTA 1975 (definition of market value of oil including light gases) apply for the purposes of this section as they apply for the purposes of Part 1 of that Act, but with the following modifications. (7) Those modifications are that— (a) any reference in paragraph 2 to the notional delivery day for the actual oil is to be read as a reference to the day on which the oil is disposed of as mentioned in this section, and (b) paragraph 2(4) is to be treated as omitted. (225H) (1) This section applies if an excess of nominated proceeds for a chargeable period— (a) is taken into account in calculating a person's profits under section 2(5)(e) of OTA 1975, or (b) would have been so taken into account if the person were chargeable to tax under OTA 1975 in respect of an oil field. (2) For income tax purposes, the amount of the excess is to be added to the consideration which the person is treated as having received in respect of oil disposed of by that person in the period. (225I) (1) This section applies if conditions A and B are met. (2) Condition A is that a person makes a relevant appropriation of oil without disposing of it. (3) Condition B is that the person does so in circumstances such that the market value of the oil— (a) falls to be taken into account under section 2 of OTA 1975 in calculating for petroleum revenue tax purposes the assessable profit or allowable loss accruing to that person in a chargeable period from an oil field, or (b) would so fall but for section 10 of that Act. (4) For income tax purposes, the person is to be treated as having, at the time of the appropriation— (a) sold the oil in the course of the separate trade consisting of activities falling within the definition of “oil-related activities” in section 16(2) (oil extraction and related activities), and (b) purchased it in the course of the separate trade consisting of activities not so falling. (5) For income tax purposes, that sale and purchase is to be treated as having been at a price equal to the market value of the oil— (a) as so taken into account under section 2 of OTA 1975, or (b) as would have been so taken into account under that section but for section 10 of that Act. (6) In this section “relevant appropriation” has the meaning given by section 12(1) of OTA 1975. (225J) (1) This section applies if conditions A, B and C are met. (2) Condition A is that a person appropriates oil acquired by the person— (a) in the course of oil extraction activities carried on by the person, or (b) as a result of oil rights held by the person. (3) Condition B is that the oil is appropriated to refining or to any use except the production purposes of an oil field (as defined in section 12(1) of OTA 1975). (4) Condition C is that section 225I does not apply in relation to the appropriation. (5) For income tax purposes— (a) the person is to be treated as having, at the time of the appropriation, sold and purchased the oil as mentioned in section 225I(4)(a) and (b), and (b) that sale and purchase is to be treated as having been at a price equal to the market value of the oil. (6) Paragraphs 2 and 3A of Schedule 3 to OTA 1975 (definition of market value of oil including light gases) apply for the purposes of this section as they apply for the purposes of Part 1 of that Act, but with the following modifications. (7) Those modifications are that— (a) any reference in paragraph 2 to the notional delivery day for the actual oil is to be read as a reference to the day on which the oil is appropriated as mentioned in this section, (b) any reference in paragraphs 2 and 2A to oil being relevantly appropriated is to be read as a reference to its being appropriated as mentioned in this section, and (c) paragraph 2(4) is to be treated as omitted. (225K) (1) This section applies if conditions A and B are met. (2) Condition A is that a person has incurred expenditure (by way of purchase, rent or otherwise) on the acquisition of an asset in a transaction to which paragraph 2 of Schedule 4 to OTA 1975 applies (transactions between connected persons or otherwise than at arm's length). (3) Condition B is that the expenditure incurred by the other person mentioned in that paragraph in acquiring, bringing into existence or enhancing the value of the asset as mentioned in that paragraph— (a) has been or is to be met by a regional development grant, and (b) falls (in whole or in part) to be taken into account under Part 2 or 6 of CAA 2001 (capital allowances relating to plant and machinery or research and development). (4) Subsection (5) applies for the purposes of the charge to income tax on the income arising from the activities of the person mentioned in subsection (2) which are treated by section 16(1) (oil extraction and related activities) as a separate trade for those purposes. (5) The expenditure mentioned in subsection (2) is to be reduced by the amount of the regional development grant mentioned in subsection (3). (6) In this section “regional development grant” means a grant falling within section 534(1) of CAA 2001 (Northern Ireland regional development grant). (225L) (1) This section applies if conditions A, B and C are met. (2) Condition A is that expenditure incurred by a person in relation to an asset in a tax year (“the initial period”) has been or is to be met by a regional development grant. (3) Condition B is that, despite the provisions of section 534(2) and (3) of CAA 2001 (Northern Ireland regional development grants) and section 225K of this Act, in determining that person's liability to income tax for the initial period, the whole or some part of that expenditure falls to be taken into account under Part 2 or 6 of CAA 2001. (4) Condition C is that— (a) expenditure on the asset becomes allowable under section 3 or 4 of OTA 1975 in a tax year (an “adjustment period”) subsequent to the initial period, or (b) the proportion of any such expenditure which is allowable in an adjustment period is different as compared with the initial period. (5) There is to be redetermined for the purposes of subsections (7) and (8) the amount of the expenditure mentioned in subsection (2) which would have been taken into account as mentioned in subsection (3) if the circumstances mentioned in subsection (4) had existed in the initial period. (6) According to whether the amount as so redetermined is greater or less than the amount actually taken into account as mentioned in subsection (3), the difference is referred to in subsections (7) and (8) as the increase or the reduction in the allowance. (7) If there is an increase in the allowance, an amount of capital expenditure equal to the increase is to be treated, for the purposes of Part 2 or 6 of CAA 2001, as having been incurred by the person concerned in the adjustment period on an extension of, or addition to, the asset mentioned in subsection (2). (8) If there is a reduction in the allowance, the person concerned is to be treated, for the purpose of determining that person's liability to income tax, as having received in the adjustment period, as income of the trade in connection with which the expenditure mentioned in subsection (2) was incurred, a sum equal to the amount of the reduction in the allowance. (9) In this section “regional development grant” has the meaning given by section 225K(6). (225M) (1) Subsection (5) applies to a sum which meets conditions A, B and C. (2) Condition A is that the sum constitutes a tariff receipt or tax-exempt tariffing receipt of a person who is a participator in an oil field. (3) Condition B is that the sum constitutes consideration in the nature of income rather than capital. (4) Condition C is that the sum would not, but for subsection (5), be treated as mentioned in that subsection. (5) The sum is to be treated as a receipt of the separate trade mentioned in section 16(1) (oil extraction and related activities). (6) So far as they would not otherwise be so treated, the activities— (a) of a participator in an oil field, or (b) of a person connected with the participator, in making available an asset in a way which gives rise to tariff receipts or tax-exempt tariffing receipts of the participator are to be treated for the purposes of this Chapter as oil extraction activities. (7) In determining for the purposes of subsection (2) whether a sum constitutes a tariff receipt or tax-exempt tariffing receipt of a person who is a participator, no account may be taken of any sum which— (a) is in fact received or receivable by a person connected with the participator, and (b) constitutes a tariff receipt or tax-exempt tariffing receipt of the participator. But in relation to the person by whom such a sum is actually received, subsection (2) has effect as if the person were a participator and as if condition A were met. (8) References in this section to a person connected with a participator include a person with whom the person is associated, within the meaning of paragraph 11 of Schedule 2 to the Oil Taxation Act 1983, but section 878(5) of this Act (application of definition of “connected” persons) does not apply for the purposes of this section. (9) In this section— - “tax-exempt tariffing receipt” has the meaning given by section 6A(2) of the Oil Taxation Act 1983, and - “tariff receipt” has the same meaning as in that Act. (225N) (1) Subsection (2) applies if, as a result of section 3(1)(hh) of OTA 1975 (obtaining abandonment guarantee), expenditure incurred by a participator in an oil field is allowable (in whole or in part) for petroleum revenue tax purposes under section 3 of that Act. (2) So far as that expenditure is so allowable, it is to be allowed as a deduction in calculating the participator's ring fence income. (3) Subsection (4) applies if a payment is made by the guarantor under an abandonment guarantee. (4) So far as any expenditure for which the relevant participator is liable is met, directly or indirectly, out of the payment, the expenditure is not to be regarded for income tax purposes as having been incurred by the relevant participator or any other participator in the oil field concerned. (5) See also section 225P (payment under abandonment guarantee not immediately applied). (6) In this Chapter— - “abandonment guarantee” has the same meaning as it has for the purposes of section 105 of FA 1991 (see section 104 of that Act), and - “the guarantor” and “the relevant participator” have the same meaning as in section 104 of that Act. (225O) (1) This section applies if— (a) a payment (“the guarantee payment”) is made by the guarantor under an abandonment guarantee, (b) as a result of the making of the guarantee payment, the relevant participator becomes liable under the terms of the abandonment guarantee to pay any sum to the guarantor, and (c) expenditure is incurred, or consideration in money's worth is given, by the relevant participator in or towards meeting that liability. (2) In this section “reimbursement expenditure” means expenditure incurred as mentioned in subsection (1)(c) or consideration (or the value of consideration) given as so mentioned; and any reference to the incurring of reimbursement expenditure is to be read accordingly. (3) So much of any reimbursement expenditure as constitutes qualifying expenditure (see subsection (4)) is to be allowed as a deduction in calculating the relevant participator's ring fence income; and no part of the expenditure which is so allowed is to be otherwise deductible or allowable by way of relief for income tax purposes. (4) The amount of reimbursement expenditure incurred in any tax year by the relevant participator which constitutes qualifying expenditure is determined by the formula— $$AxBC$where—A is the reimbursement expenditure incurred in the tax year,B is so much of the expenditure represented by the guarantee payment as, had it been incurred by the relevant participator, would have been taken into account (by way of capital allowance or a deduction) in calculating the relevant participator's ring fence income, andC is the total of the sums which, at or before the end of the tax year, the relevant participator is or has become liable to pay to the guarantor as mentioned in subsection (1)(b).$ But this is subject to subsection (5). (5) In relation to the guarantee payment, the total of the reimbursement expenditure (whenever incurred) which constitutes qualifying expenditure may not exceed whichever is the less of B and C in subsection (4). (6) Any limitation on qualifying expenditure under subsection (5) is to be applied to the expenditure of a later tax year in preference to an earlier one. (7) For the purposes of this section, the expenditure represented by the guarantee payment is any expenditure— (a) for which the relevant participator is liable, and (b) which is met, directly or indirectly, out of the guarantee payment (and which, accordingly, because of section 225N(4) is not to be regarded as expenditure incurred by the relevant participator). (8) See also— (a) section 225P (payment under abandonment guarantee not immediately applied), and (b) section 225Q which excludes amounts from subsection (1). (225P) (1) This section applies if— (a) a payment made by the guarantor under an abandonment guarantee is not immediately applied in meeting any expenditure, (b) the payment is for any period invested (either specifically or together with payments made by persons other than the guarantor) so as to be represented by, or by part of, the assets of a fund or account, and (c) at a subsequent time, any expenditure for which the relevant participator is liable is met out of the assets of the fund or account. (2) The references in sections 225N(4) and 225O(7) to expenditure which is met, directly or indirectly, out of the payment are to be read as references to so much of the expenditure for which the relevant participator is liable as is met out of those assets of the fund or account which, at the subsequent time mentioned in subsection (1)(c), it is just and reasonable to attribute to the payment. (225Q) (1) This section applies if— (a) the whole of the guarantee payment mentioned in section 225O, or of the assets which under section 225P are attributed to the guarantee payment, is not applied in meeting liabilities of the relevant participator so mentioned which fall within section 104(1)(a) and (b) of FA 1991, and (b) a sum representing the unapplied part of the guarantee payment or of those assets is repaid, directly or indirectly, to the guarantor so mentioned. (2) Any liability of the relevant participator to repay that sum is to be excluded in determining the total liability of the relevant participator which falls within section 225O(1)(b). (3) The repayment to the guarantor of that sum is not to be regarded as expenditure incurred by the relevant participator as mentioned in section 225O(1)(c). (225R) (1) Sections 225S and 225T apply if— (a) paragraph 2A of Schedule 5 to OTA 1975 applies, or would apply if a claim under paragraph 2A(2) of that Schedule were made, and (b) the default payment falls (in whole or part) to be attributed to the contributing participator under paragraph 2A(2) of that Schedule. (2) In section 225S “the additional abandonment expenditure” means the amount which is attributed to the contributing participator as mentioned in subsection (1)(b) (whether representing the whole or only part of the default payment). (3) In this Chapter “default payment”, “the defaulter” and “contributing participator” have the same meaning as in paragraph 2A of Schedule 5 to OTA 1975. (225S) (1) Relief by way of capital allowance, or a deduction in calculating ring fence income, is to be available to the contributing participator in respect of the additional abandonment expenditure if any such relief or deduction would have been available to the defaulter if— (a) the defaulter had incurred the additional abandonment expenditure, and (b) at the time that that expenditure was incurred the defaulter continued to carry on a ring fence trade. (2) The basis of qualification for or entitlement to any relief or deduction which is available to the contributing participator under this section is to be determined on the assumption that the conditions in subsection (1)(a) and (b) are met. (3) But, subject to subsection (2), any such relief or deduction is to be available in the same way as if the additional abandonment expenditure had been incurred by the contributing participator for the purposes of the ring fence trade carried on by the contributing participator. (225T) (1) This section applies if expenditure is incurred, or consideration in money's worth is given, by the defaulter in reimbursing the contributing participator in respect of, or otherwise making good to the contributing participator, the whole or any part of the default payment. (2) In this section “reimbursement expenditure” means expenditure incurred as mentioned in subsection (1) or consideration (or the value of consideration) given as so mentioned; and any reference to the incurring of reimbursement expenditure is to be read accordingly. (3) Reimbursement expenditure is to be allowed as a deduction in calculating the defaulter's ring fence income (but this is subject to subsection (6)). (4) Reimbursement expenditure received by the contributing participator is to be treated as a receipt (in the nature of income) of the participator's ring fence trade for the relevant tax year (but this is subject to subsection (6)). (5) Any additional assessment to income tax required in order to take account of the receipt of reimbursement expenditure by the contributing participator may be made at any time not later than 4 years after the end of the calendar year in which the reimbursement expenditure is so received. (6) In relation to a particular default payment, reimbursement expenditure incurred at any time— (a) is to be allowed as mentioned in subsection (3), and (b) is to be taken into account as a result of subsection (4) in calculating the contributing participator's ring fence income, only so far as, when aggregated with any reimbursement expenditure previously incurred in respect of that default payment, it does not exceed so much of the default payment as falls to be attributed to the contributing participator as mentioned in section 225R(1)(b). (7) The incurring of reimbursement expenditure is not to be regarded, by virtue of section 532 of CAA 2001 (the general rule excluding contributions), as the meeting of the expenditure of the contributing participator in making the default payment. (8) In subsection (4) “the relevant tax year” means— (a) the tax year in which the reimbursement expenditure is received by the contributing participator, or (b) if the contributing participator's ring fence trade is permanently discontinued before the receipt of the reimbursement expenditure, the last tax year in which that trade was carried on. (225U) (1) Subsection (2) applies if interest is paid to a participator under paragraph 10(4) of Schedule 19 to FA 1982 (interest on advance petroleum revenue tax which becomes repayable). (2) The interest paid is to be disregarded in calculating the participator's income for income tax purposes.

SCHEDULE 2 — Alternative finance arrangements

Part 1 — New Part 10A of ITA 2007

1

ITA 2007 is amended as follows.

2

After Part 10 insert—

(564A) (1) This Part— (a) contains provisions about the treatment as interest for certain income tax purposes of alternative finance return under alternative finance arrangements with financial institutions (see sections 564M to 564Q), and (b) contains some special provisions about the treatment of investment bond arrangements (see sections 564R to 564U) and some other rules about alternative finance arrangements (see sections 564V to 564Y). (2) In this Part “alternative finance arrangements” means— (a) purchase and resale arrangements, (b) diminishing shared ownership arrangements, (c) deposit arrangements, (d) profit share agency arrangements, and (e) investment bond arrangements. (3) In this Part— (a) “purchase and resale arrangements” means arrangements to which section 564C applies, (b) “diminishing shared ownership arrangements” means arrangements to which section 564D applies, (c) “deposit arrangements” means arrangements to which section 564E applies, (d) “profit share agency arrangements” means arrangements to which section 564F applies, and (e) “investment bond arrangements” means arrangements to which section 564G applies. (4) For the meaning of “alternative finance return”, see sections 564I to 564L. (5) For the meaning of “financial institution”, see section 564B. (6) Also, see section 366 of TIOPA 2010 (power to extend this Part and other provisions to other arrangements by order).

3

After section 564A insert—

(564B) (1) In this Part “financial institution” means— (a) a bank, as defined by section 991, (b) a building society, (c) a wholly-owned subsidiary— (i) of a bank within paragraph (a), or (ii) of a building society, (d) a person authorised by a licence under Part 3 of the Consumer Credit Act 1974 to carry on a consumer credit business or consumer hire business within the meaning of that Act, (e) a bond-issuer, within the meaning of section 564G, but only in relation to any bond assets which are rights under purchase and resale arrangements, diminishing shared ownership arrangements or profit share agency arrangements, (f) a person authorised in a jurisdiction outside the United Kingdom— (i) to receive deposits or other repayable funds from the public, and (ii) to grant credits for its own account, (g) an insurance company as defined in section 431(2) of ICTA, or (h) a person who is authorised in a jurisdiction outside the United Kingdom to carry on a business which consists of effecting or carrying out contracts of insurance or substantially similar business but not an insurance special purpose vehicle as defined in section 431(2) of ICTA. (2) For the purposes of subsection (1)(c) a company is a wholly-owned subsidiary of a bank or building society (“the parent”) if it has no members except— (a) the parent or persons acting on behalf of the parent, and (b) the parent's wholly-owned subsidiaries or persons acting on behalf of the parent's wholly-owned subsidiaries.

4

After section 564B insert—

(564C) (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 564H (provision not at arm's length: exclusion of arrangements from this section and sections 564D to 564G).

5

After section 564C insert—

(564D) (1) This section applies to arrangements if under them— (a) a financial institution (“the first owner”) acquires a beneficial interest in an asset, (b) another person (“the eventual owner”) also acquires a beneficial interest in it, (c) the eventual owner is to make payments to the first owner amounting in aggregate to the consideration paid for the acquisition of the first owner's beneficial interest (but subject to any adjustment required for such a reduction as is mentioned in subsection (5)), (d) the eventual owner is to acquire the first owner's beneficial interest (whether or not in stages) as a result of those payments, (e) the eventual owner is to make other payments to the first owner (whether under a lease forming part of the arrangements or otherwise), (f) the eventual owner has the exclusive right to occupy or otherwise to use the asset, and (g) the eventual owner is exclusively entitled to any income, profit or gain arising from or attributable to the asset (including, in particular, an increase in its value). (2) For the purposes of subsection (1)(a) it does not matter if— (a) the first owner acquires its beneficial interest from the eventual owner, (b) the eventual owner, or another person who is not the first owner, also has a beneficial interest in the asset, or (c) the first owner also has a legal interest in it. (3) Subsection (1)(f) does not prevent the eventual owner from granting an interest or right in relation to the asset if the conditions in subsection (4) are met. (4) The conditions are that— (a) the grant is not to— (i) the first owner, (ii) a person controlled by the first owner, or (iii) a person controlled by a person who also controls the first owner, and (b) the grant is not required by the first owner or arrangements to which the first owner is a party. (5) Subsection (1)(g) does not prevent the first owner from— (a) having responsibility for any reduction in the asset's value, or (b) having a share in a loss arising out of any such reduction. (6) This section is subject to section 564H (provision not at arm's length: exclusion of arrangements from section 564C, this section and sections 564E to 564G).

6

After section 564D insert—

(564E) (1) This section applies to arrangements if under them— (a) a person (“the depositor”) deposits money with a financial institution, (b) the money, together with money deposited with the institution by other persons, is used by it with a view to producing a profit, (c) from time to time the institution makes or credits a payment to the depositor out of profit resulting from the use of the money, (d) the payment is in proportion to the amount deposited by the depositor, and (e) the payments so made or credited by the institution equate, in substance, to the return on an investment of money at interest. (2) This section is subject to section 564H (provision not at arm's length: exclusion of arrangements from sections 564C and 564D, this section and sections 564F and 564G).

7

After section 564E insert—

(564F) (1) This section applies to arrangements if under them— (a) a person (“the principal”) appoints an agent, (b) one or both of the principal and agent is a financial institution, (c) the agent uses money provided by the principal with a view to producing a profit, (d) the principal is entitled, to a specified extent, to profits resulting from the use of the money, (e) the agent is entitled to any additional profits resulting from its use (and may also be entitled to a fee paid by the principal), and (f) payments made because of the principal's entitlement to profits equate, in substance, to the return on an investment of money at interest. (2) This section is subject to section 564H (provision not at arm's length: exclusion of arrangements from sections 564C to 564E, this section and section 564G).

8

After section 564F insert—

(564G) (1) This section applies to arrangements if— (a) they provide for one person (“the bond-holder”) to pay a sum of money (“the capital”) to another (“the bond-issuer”), (b) they identify assets, or a class of assets, which the bond-issuer will acquire for the purpose of generating income or gains directly or indirectly (“the bond assets”), (c) they specify a period at the end of which they cease to have effect (“the bond term”), (d) the bond-issuer undertakes under the arrangements— (i) to dispose at the end of the bond term of any bond assets which are still in the bond-issuer's possession, (ii) to make a repayment of the capital (“the redemption payment”) to the bond-holder during or at the end of the bond-term (whether or not in instalments), and (iii) to pay to the bond-holder other payments on one or more occasions during or at the end of the bond term (“additional payments”), (e) the amount of the additional payments does not exceed an amount which would be a reasonable commercial return on a loan of the capital, (f) under the arrangements the bond-issuer undertakes to arrange for the management of the bond assets with a view to generating income sufficient to pay the redemption payment and additional payments, (g) the bond-holder is able to transfer the rights under the arrangements to another person (who becomes the bond-holder because of the transfer), (h) the arrangements are a listed security on a recognised stock exchange, and (i) the arrangements are wholly or partly treated in accordance with international accounting standards as a financial liability of the bond-issuer, or would be if the bond-issuer applied those standards. (2) For the purposes of subsection (1)— (a) the bond-issuer may acquire bond assets before or after the arrangements take effect, (b) the bond assets may be property of any kind, including rights in relation to property owned by someone other than the bond-issuer, (c) the identification of the bond assets mentioned in subsection (1)(b) and the undertakings mentioned in subsection (1)(d) and (f) may (but need not) be described as, or accompanied by a document described as, a declaration of trust, (d) a reference to the management of assets includes a reference to disposal, (e) the bond-holder may (but need not) be entitled under the arrangements to terminate them, or participate in terminating them, before the end of the bond term, (f) the amount of the additional payments may be— (i) fixed at the beginning of the bond term, (ii) determined wholly or partly by reference to the value of or income generated by the bond assets, or (iii) determined in some other way, (g) if the amount of the additional payments is not fixed at the beginning of the bond term, the reference in subsection (1)(e) to the amount of the additional payments is a reference to the maximum amount of the additional payments, (h) the amount of the redemption payment may (but need not) be subject to reduction in the event of a fall in the value of the bond assets or in the rate of income generated by them, and (i) entitlement to the redemption payment may (but need not) be capable of being satisfied (whether or not at the option of the bond-issuer or the bond-holder) by the issue or transfer of shares or other securities. (3) This section is subject to section 564H (provision not at arm's length: exclusion of arrangements from sections 564C to 564F and this section).

9

After section 564G insert—

(564H) (1) Arrangements to which this section applies are not— (a) purchase and resale arrangements, (b) diminishing shared ownership arrangements, (c) deposit arrangements, (d) profit share agency arrangements, or (e) investment bond arrangements. (2) This section applies to arrangements if— (a) apart from this section they would be alternative finance arrangements, (b) subsection (3) or (5) of section 147 of TIOPA 2010 (tax calculations to be based on arm's length, not actual, provision) requires the profits and losses of a person who is a party to the arrangements to be calculated for tax purposes as if the arm's length provision (within the meaning of that section) had been made or imposed rather than in accordance with the arrangements, (c) any person who is an affected person for the purposes of Part 4 of that Act (“the affected person”) is entitled to— (i) relevant return in relation to the arrangements, or (ii) an amount representing relevant return in relation to them, and (d) the affected person is not subject— (i) to income tax or corporation tax, or (ii) to any corresponding tax under the law of a territory outside the United Kingdom, on the relevant return or the amount representing it. (3) In this section “relevant return”, in relation to arrangements, means any amount which would be alternative finance return if the arrangements were alternative finance arrangements.

10

After section 564H insert—

(564I) (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 564C have the same meaning as in that section.

11

After section 564I insert—

(564J) (1) If, in the case of purchase and resale arrangements, alternative finance return is paid in a currency other than sterling— (a) by or to a person other than a company, and (b) otherwise than for the purposes of a trade, profession or vocation or a property business, subsections (2) and (3) apply as respects that person. (2) The amount of the excess referred to in section 564I(2) and (5)(b) and the appropriate amount for the purposes of section 564I(3) and (4) are to be calculated in that other currency. (3) The amount of each payment of alternative finance return is to be translated into sterling at a spot rate of exchange for the day on which the payment is made.

12

After section 564J insert—

(564K) (1) In the case of diminishing shared ownership arrangements, payments by the eventual owner under the arrangements are alternative finance return for the purposes of this Part, except so far as subsection (2) or (3) applies to them. (2) This subsection applies to the payments so far as they amount to payments of the kind described in section 564D(1)(c) (payments to be made by the eventual owner to the institution, amounting to the consideration paid for the acquisition of the institution's beneficial interest). (3) This subsection applies to the payments so far as they amount to payments in respect of any arrangement fee or legal or other expenses which the eventual owner is required under the arrangements to pay. (4) In this section “the eventual owner” has the same meaning as in section 564D.

13

After section 564K insert—

(564L) (1) In the case of deposit arrangements, amounts paid or credited as mentioned in section 564E(1)(c) by a financial institution under the arrangements (payments to depositor out of profits resulting from use of money) are alternative finance return for the purposes of this Part. (2) In the case of profit share agency arrangements, amounts paid or credited by a financial institution in accordance with such an entitlement as is mentioned in section 564F(1)(d) (principal's entitlement to profits under the arrangements) are alternative finance return for the purposes of this Part. (3) In the case of investment bond arrangements, the additional payments under the arrangements are alternative finance return for the purposes of this Part, but subject to subsection (4). (4) If any part of the additional payments in respect of investment bond arrangements equates in substance to discount, that part is not treated as alternative finance return for income tax purposes. (5) In this section “additional payments” has the same meaning as in section 564G (see subsection (1)(d)(iii) of that section). (6) For the treatment of the part of the additional payments to which subsection (4) applies, see section 564R (treatment of discount).

14

After section 564L insert—

(564M) (1) Alternative finance return is treated as interest for the purposes of ITTOIA 2005. (2) References to interest in section 380 of that Act (funding bonds) include references to alternative finance return.

15

After section 564M insert—

(564N) (1) This section applies so far as a person is a party to alternative finance arrangements for the purposes of— (a) a trade, profession or vocation carried on by that person, or (b) a property business of that person. (2) Alternative finance return paid by that person is treated as an expense of the trade, profession, vocation or business. (3) In section 58 of ITTOIA 2005— (a) references to a loan include references to alternative finance arrangements, and (b) references to interest include references to alternative finance return.

16

After section 564N insert—

(564O) (1) Chapter 1 of Part 8 of this Act (interest payments) has effect as if— (a) purchase and resale arrangements involved the making of a loan, and (b) alternative finance return were interest. (2) Section 412 (information) has effect accordingly.

17

After section 564O insert—

(564P) Section 809ZG (tax relief schemes and arrangements) applies to alternative finance return as it applies to interest.

18

After section 564P insert—

(564Q) (1) Chapter 2 of Part 15 (deduction of income tax at source: deduction by deposit-takers and building societies), and Chapter 19 of that Part so far as it has effect for the purposes of Chapter 2 of that Part, have effect as if— (a) relevant alternative finance arrangements were a deposit, (b) for the purposes of section 866(2)(a) such arrangements were a deposit consisting of a loan, and (c) alternative finance return payable under such arrangements were interest. (2) For the purposes of subsection (1) alternative finance arrangements are relevant unless they are purchase and resale arrangements where the second purchaser is not a financial institution. (3) In subsection (2) “the second purchaser” has the same meaning as in section 564C. (4) In Chapter 12 of Part 15 (funding bonds) references to interest include references to alternative finance return. (5) Chapters 3 to 5 of Part 15, and Chapter 19 of that Part so far as it has effect for the purposes of those Chapters, apply to alternative finance return as they apply to interest.

19

After section 564Q insert—

(564R) (1) This section applies if any part of the additional payments in respect of investment bond arrangements is excluded from being alternative finance return by section 564L(4) because it equates in substance to discount. (2) That part is treated in accordance with section 381 of ITTOIA 2005 (discounts) unless subsection (3) applies. (3) If the arrangements are deeply discounted securities for the purposes of Chapter 8 of Part 4 of that Act (profits from deeply discounted securities), that part is treated in accordance with that Chapter. (4) In this section “additional payments” has the same meaning as in section 564G of this Act (see subsection (1)(d)(iii) of that section).

20

After section 564R insert—

(564S) (1) This section applies for the purposes of the Income Tax Acts and irrespective of the position for other purposes. (2) The bond-holder under investment bond arrangements is not treated as having a legal or beneficial interest in the bond assets. (3) The bond-issuer under such arrangements is not treated as a trustee of the bond assets. (4) Profits accruing to the bond-issuer in connection with the bond assets are profits of the bond-issuer and not of the bond-holder (and do not arise to the bond-issuer in a fiduciary or representative capacity). (5) Payments made by the bond-issuer by way of redemption payment or additional payment are not made in a fiduciary or representative capacity. (6) The bond-holder is not entitled to relief for capital expenditure in connection with the bond assets. (7) Expressions used in this section have the same meaning as in section 564G.

21

After section 564S insert—

(564T) (1) Investment bond arrangements are securities for the purposes of the Income Tax Acts (including Chapters 1 to 5 of Part 7 of ITEPA 2003). (2) For those purposes— (a) a reference in an enactment to redemption is to be taken as a reference to making the redemption payment, and (b) a reference in an enactment to interest is to be taken as a reference to alternative finance return. (3) In subsection (2) “the redemption payment” has the same meaning as in section 564G (see subsection (1)(d)(ii) of that section).

22

After section 564T insert—

(564U) Investment bond arrangements are not— (a) a unit trust scheme for the purposes of section 1007 of this Act, or (b) an offshore fund for the purposes of section 354 of TIOPA 2010 so far as relating to income tax.

23

After section 564U insert—

(564V) (1) If under purchase and resale arrangements an asset is sold by one party to the arrangements to the other party, the alternative finance return is excluded in determining the consideration for the sale and purchase of the asset for the purposes of the Income Tax Acts (apart from section 564C). (2) If under diminishing shared ownership arrangements an asset is sold by one party to the arrangements to the other party, the alternative finance return is excluded in determining the consideration for the sale and purchase of the asset for the purposes of the Income Tax Acts (apart from section 564D). (3) If under investment bond arrangements an asset is sold by one party to the arrangements to the other party, the alternative finance return is excluded in determining the consideration for the sale and purchase of the asset for the purposes of the Income Tax Acts (apart from section 564G). (4) Subsections (1) to (3) do not affect the operation of any provision of the Tax Acts or TCGA 1992 that provides that the consideration for a sale or purchase is taken for any purpose to be an amount other than the actual consideration.

24

After section 564V insert—

(564W) Diminishing shared ownership arrangements are not treated as a partnership for the purposes of the Income Tax Acts.

25

After section 564W insert—

(564X) (1) The principal under profit share agency arrangements is not treated for the purposes of the Income Tax Acts as entitled to profits to which the agent is entitled in accordance with section 564F(1)(e). (2) And the agent under such arrangements is treated for those purposes as entitled to those profits and the profits specified in section 564F(1)(d). (3) In this section “the principal” and “the agent” are to be read in accordance with section 564F.

26

After section 564X insert—

(564Y) (1) This section applies if arrangements to which section 564H (provision not at arm's length: exclusion of arrangements from sections 564C to 564G) applies would, but for that section, be alternative finance arrangements. (2) A person paying relevant return under the arrangements is not entitled to— (a) any deduction in respect of the relevant return in calculating profits or other income for income tax purposes, or (b) any deduction in respect of the relevant return in calculating net income. (3) In this section “relevant return” has the same meaning as in section 564H (see subsection (3) of that section).

Part 2 — New Chapter 4 of Part 4 of TCGA 1992

27

TCGA 1992 is amended as follows.

28

After Chapter 3 of Part 4 insert—

(151H) (1) This Chapter makes provision about the treatment of alternative finance arrangements with financial institutions and alternative finance return under such arrangements for the purposes of this Act (see sections 151T to 151Y). (2) In this Chapter “alternative finance arrangements” means— (a) purchase and resale arrangements, (b) diminishing shared ownership arrangements, (c) deposit arrangements, (d) profit share agency arrangements, and (e) investment bond arrangements. (3) In this Chapter— (a) “purchase and resale arrangements” means arrangements to which section 151J applies, (b) “diminishing shared ownership arrangements” means arrangements to which section 151K applies, (c) “deposit arrangements” means arrangements to which section 151L applies, (d) “profit share agency arrangements” means arrangements to which section 151M applies, and (e) “investment bond arrangements” means arrangements to which section 151N applies. (4) For the meaning of “alternative finance return”, see sections 151P to 151S. (5) For the meaning of “financial institution”, see section 151I. (6) Also, see— (a) section 366 of TIOPA 2010 (power to extend this Chapter and other provisions to other arrangements by order), and (b) Schedule 61 to FA 2009 (alternative finance investment bonds) which makes further provision about the treatment of investment bond arrangements for the purposes of this Act.

29

After section 151H insert—

(151I) (1) In this Chapter “financial institution” means— (a) a bank, as defined by section 1120 of CTA 2010, (b) a building society, (c) a wholly-owned subsidiary— (i) of a bank within paragraph (a), or (ii) of a building society, (d) a person authorised by a licence under Part 3 of the Consumer Credit Act 1974 to carry on a consumer credit business or consumer hire business within the meaning of that Act, (e) a bond-issuer, within the meaning of section 151N, but only in relation to any bond assets which are rights under purchase and resale arrangements, diminishing shared ownership arrangements or profit share agency arrangements, (f) a person authorised in a jurisdiction outside the United Kingdom— (i) to receive deposits or other repayable funds from the public, and (ii) to grant credits for its own account, (g) an insurance company as defined in section 431(2) of ICTA, or (h) a person who is authorised in a jurisdiction outside the United Kingdom to carry on a business which consists of effecting or carrying out contracts of insurance or substantially similar business but not an insurance special purpose vehicle as defined in section 431(2) of ICTA. (2) For the purposes of subsection (1)(c) a company is a wholly-owned subsidiary of a bank or building society (“the parent”) if it has no members except— (a) the parent or persons acting on behalf of the parent, and (b) the parent's wholly-owned subsidiaries or persons acting on behalf of the parent's wholly-owned subsidiaries.

30

After section 151I insert—

(151J) (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 151O (provision not at arm's length: exclusion of arrangements from this section and sections 151K to 151N).

31

After section 151J insert—

(151K) (1) This section applies to arrangements if under them— (a) a financial institution (“the first owner”) acquires a beneficial interest in an asset, (b) another person (“the eventual owner”) also acquires a beneficial interest in it, (c) the eventual owner is to make payments to the first owner amounting in aggregate to the consideration paid for the acquisition of the first owner's beneficial interest (but subject to any adjustment required for such a reduction as is mentioned in subsection (5)), (d) the eventual owner is to acquire the first owner's beneficial interest (whether or not in stages) as a result of those payments, (e) the eventual owner is to make other payments to the first owner (whether under a lease forming part of the arrangements or otherwise), (f) the eventual owner has the exclusive right to occupy or otherwise to use the asset, and (g) the eventual owner is exclusively entitled to any income, profit or gain arising from or attributable to the asset (including, in particular, an increase in its value). (2) For the purposes of subsection (1)(a) it does not matter if— (a) the first owner acquires its beneficial interest from the eventual owner, (b) the eventual owner, or another person who is not the first owner, also has a beneficial interest in the asset, or (c) the first owner also has a legal interest in it. (3) Subsection (1)(f) does not prevent the eventual owner from granting an interest or right in relation to the asset if the conditions in subsection (4) are met. (4) The conditions are that— (a) the grant is not to— (i) the first owner, (ii) a person controlled by the first owner, or (iii) a person controlled by a person who also controls the first owner, and (b) the grant is not required by the first owner or arrangements to which the first owner is a party. (5) Subsection (1)(g) does not prevent the first owner from— (a) having responsibility for any reduction in the asset's value, or (b) having a share in a loss arising out of any such reduction. (6) Section 1124 of CTA 2010 (meaning of “control”) applies for the purposes of this section. (7) This section is subject to section 151O (provision not at arm's length: exclusion of arrangements from section 151J, this section and sections 151L to 151N).

32

After section 151K insert—

(151L) (1) This section applies to arrangements if under them— (a) a person (“the depositor”) deposits money with a financial institution, (b) the money, together with money deposited with the institution by other persons, is used by it with a view to producing a profit, (c) from time to time the institution makes or credits a payment to the depositor out of profit resulting from the use of the money, (d) the payment is in proportion to the amount deposited by the depositor, and (e) the payments so made or credited by the institution equate, in substance, to the return on an investment of money at interest. (2) This section is subject to section 151O (provision not at arm's length: exclusion of arrangements from sections 151J, 151K, this section and sections 151M and 151N).

33

After section 151L insert—

(151M) (1) This section applies to arrangements if under them— (a) a person (“the principal”) appoints an agent, (b) one or both of the principal and agent is a financial institution, (c) the agent uses money provided by the principal with a view to producing a profit, (d) the principal is entitled, to a specified extent, to profits resulting from the use of the money, (e) the agent is entitled to any additional profits resulting from its use (and may also be entitled to a fee paid by the principal), and (f) payments made because of the principal's entitlement to profits equate, in substance, to the return on an investment of money at interest. (2) This section is subject to section 151O (provision not at arm's length: exclusion of arrangements from sections 151J to 151L, this section and section 151N).

34

After section 151M insert—

(151N) (1) This section applies to arrangements if— (a) they provide for one person (“the bond-holder”) to pay a sum of money (“the capital”) to another (“the bond-issuer”), (b) they identify assets, or a class of assets, which the bond-issuer will acquire for the purpose of generating income or gains directly or indirectly (“the bond assets”), (c) they specify a period at the end of which they cease to have effect (“the bond term”), (d) the bond-issuer undertakes under the arrangements— (i) to dispose at the end of the bond term of any bond assets which are still in the bond-issuer's possession, (ii) to make a repayment of the capital (“the redemption payment”) to the bond-holder during or at the end of the bond-term (whether or not in instalments), and (iii) to pay to the bond-holder other payments on one or more occasions during or at the end of the bond term (“additional payments”), (e) the amount of the additional payments does not exceed an amount which would be a reasonable commercial return on a loan of the capital, (f) under the arrangements the bond-issuer undertakes to arrange for the management of the bond assets with a view to generating income sufficient to pay the redemption payment and additional payments, (g) the bond-holder is able to transfer the rights under the arrangements to another person (who becomes the bond-holder because of the transfer), (h) the arrangements are a listed security on a recognised stock exchange, and (i) the arrangements are wholly or partly treated in accordance with international accounting standards as a financial liability of the bond-issuer, or would be if the bond-issuer applied those standards. (2) For the purposes of subsection (1)— (a) the bond-issuer may acquire bond assets before or after the arrangements take effect, (b) the bond assets may be property of any kind, including rights in relation to property owned by someone other than the bond-issuer, (c) the identification of the bond assets mentioned in subsection (1)(b) and the undertakings mentioned in subsection (1)(d) and (f) may (but need not) be described as, or accompanied by a document described as, a declaration of trust, (d) a reference to the management of assets includes a reference to disposal, (e) the bond-holder may (but need not) be entitled under the arrangements to terminate them, or participate in terminating them, before the end of the bond term, (f) the amount of the additional payments may be— (i) fixed at the beginning of the bond term, (ii) determined wholly or partly by reference to the value of or income generated by the bond assets, or (iii) determined in some other way, (g) if the amount of the additional payments is not fixed at the beginning of the bond term, the reference in subsection (1)(e) to the amount of the additional payments is a reference to the maximum amount of the additional payments, (h) the amount of the redemption payment may (but need not) be subject to reduction in the event of a fall in the value of the bond assets or in the rate of income generated by them, and (i) entitlement to the redemption payment may (but need not) be capable of being satisfied (whether or not at the option of the bond-issuer or the bond-holder) by the issue or transfer of shares or other securities. (3) This section is subject to section 151O (provision not at arm's length: exclusion of arrangements from sections 151J to 151M and this section).

35

After section 151N insert—

(151O) (1) Arrangements to which this section applies are not— (a) purchase and resale arrangements, (b) diminishing shared ownership arrangements, (c) deposit arrangements, (d) profit share agency arrangements, or (e) investment bond arrangements. (2) This section applies to arrangements if— (a) apart from this section they would be alternative finance arrangements, (b) subsection (3) or (5) of section 147 of TIOPA 2010 (tax calculations to be based on arm's length, not actual, provision) requires the profits and losses of a person who is a party to the arrangements to be calculated for tax purposes as if the arm's length provision (within the meaning of that section) had been made or imposed rather than in accordance with the arrangements, (c) any person who is an affected person for the purposes of Part 4 of that Act (“the affected person”) is entitled to— (i) relevant return in relation to the arrangements, or (ii) an amount representing relevant return in relation to them, and (d) the affected person is not subject— (i) to income tax or corporation tax, or (ii) to any corresponding tax under the law of a territory outside the United Kingdom, on the relevant return or the amount representing it. (3) In this section “relevant return”, in relation to arrangements, means any amount which would be alternative finance return if the arrangements were alternative finance arrangements.

36

After section 151O insert—

(151P) (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 Chapter. (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 151J have the same meaning as in that section.

37

After section 151P insert—

(151Q) (1) If, in the case of purchase and resale arrangements, alternative finance return is paid in a currency other than sterling— (a) by or to a person other than a company, and (b) otherwise than for the purposes of a trade, profession or vocation or a property business, subsections (2) and (3) apply as respects that person. (2) The amount of the excess referred to in section 151P(2) and (5)(b) and the appropriate amount for the purposes of section 151P(3) and (4) are to be calculated in that other currency. (3) The amount of each payment of alternative finance return is to be translated into sterling at a spot rate of exchange for the day on which the payment is made.

38

After section 151Q insert—

(151R) (1) In the case of diminishing shared ownership arrangements, payments by the eventual owner under the arrangements are alternative finance return for the purposes of this Chapter, except so far as subsection (2) or (3) applies to them. (2) This subsection applies to the payments so far as they amount to payments of the kind described in section 151K(1)(c) (payments to be made by the eventual owner to the institution, amounting to the consideration paid for the acquisition of the institution's beneficial interest). (3) This subsection applies to the payments so far as they amount to payments in respect of any arrangement fee or legal or other expenses which the eventual owner is required under the arrangements to pay. (4) In this section “the eventual owner” has the same meaning as in section 151K.

39

After section 151R insert—

(151S) (1) In the case of deposit arrangements, amounts paid or credited as mentioned in section 151L(1)(c) by a financial institution under the arrangements (payments to depositor out of profits resulting from use of money) are alternative finance return for the purposes of this Chapter. (2) In the case of profit share agency arrangements, amounts paid or credited by a financial institution in accordance with such an entitlement as is mentioned in section 151M(1)(d) (principal's entitlement to profits under the arrangements) are alternative finance return for the purposes of this Chapter. (3) In the case of investment bond arrangements, the additional payments under the arrangements are alternative finance return for the purposes of this Chapter. (4) In this section “additional payments” has the same meaning as in section 151N (see subsection (1)(d)(iii) of that section).

40

After section 151S insert—