Section 809BZL — Income Tax Act 2007: Deemed interest

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

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.