Taxes Consolidation Act 1997 section 813

Taxation of transactions associated with loans or credit

Section 813 is an anti-avoidance measure that targets arrangements under which loan or credit transactions are structured so that what is, in substance, interest is disguised as another form of payment, thereby reducing the borrower's tax liability.

• The section applies to any transaction connected with the lending of money or giving of credit, including transactions between the parties themselves or persons connected with either of them.
• Where a loan arrangement provides for annual payments (other than interest) chargeable under Schedule D, those payments are treated as payments of annual interest for tax purposes.
• Where income-producing securities or property are temporarily transferred as part of a loan arrangement, the original owner is taxable under Schedule D Case IV on the income arising from those assets until the loan is repaid.
• Where an owner of income-producing property forgoes or assigns the income from the property without transferring the property itself, the owner is taxable under Schedule D Case IV on the gross amount of the income forgone.