Section 809BZI — Income Tax Act 2007: Deemed interest

Deemed interest 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 c treat the deemed interest as paid at the times when the interest elements are treated as paid.