Section 809BZE — Income Tax Act 2007: Deemed interest if borrower is a partnership

Deemed interest if borrower is a partnership 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 c treat the deemed interest as paid at the times when the interest elements are treated as paid.