Section FA 15 — Income Tax Act 2007: Treatment when agreement ends: seller acquiring property

FA 15 Treatment when agreement ends: seller acquiring property When this section applies (1) This section applies, subject to sections FA 16 and FA 17 , when— (a) a hire purchase agreement described in section FA 12 ends by the date on which its term ends or after that date; and (b) the buyer does not acquire ownership of the property; and (c) a person associated with the buyer does not acquire ownership of the property. Sale of property (2) The seller is treated as buying the property from the buyer for an amount equal to the outstanding balance calculated under subsection (3), and the buyer is treated as selling the property to the seller for that amount. The date of the sale is the date the agreement ends. Outstanding balance (3) The outstanding balance is the amount calculated using the formula— net balance due on termination − buyer’s termination payment + seller’s termination payment. Definition of items in formula (4) In the formula,— (a) net balance due on termination is the net balance due under the hire purchase agreement on the date the agreement ends less any costs and expenses referred to in section 31(2)(c) and (d) of the Credit (Repossession) Act 1997: (b) buyer’s termination payment is the sum of the following amounts, as applicable: (i) an amount paid by the buyer, or an associated person, to the seller, or an associated person, under the agreement; and (ii) an amount paid as a consequence of the ending of the agreement; and (iii) an amount required to be taken into account by the buyer under the base price adjustment in section EW 31 (Base price adjustment formula) or in item “ a ” of the formula in section EZ 38(1) (Income and expenditure where financial arrangement redeemed or disposed of): (c) seller’s termination payment is the sum of the following amounts, as applicable: (i) an amount paid by the seller, or an associated person, to the buyer, or an associated person, under the agreement; and (ii) an amount paid as a consequence of the ending of the agreement; and (iii) an amount required to be taken into account by the buyer under the base price adjustment in section EW 31 or by the seller in item “ b ” or “ c ” of the formula in section EZ 38(1) or (2) . Base price adjustment (5) For the purposes of section EW 31 , the outstanding balance is taken into account as the consideration paid by the buyer to the seller under the hire purchase agreement. Defined in this Act: amount , associated person , hire purchase agreement , outstanding balance , Compare: 2004 No 35 ss FC 10(2), (5)(a) , OB 1 “ lessee’s outstanding balance ” , “ lessor’s outstanding balance ” , “ net balance due ”