Corporation Tax Act 2009 section 480

Relevant non-lending relationships involving discounts

Section 480 explains when a company has a "relevant non-lending relationship" because a discount arises from a money debt that did not come from a lending transaction, and sets out the conditions that must be met for the loan relationship rules to apply to such discounts.

• A company has a relevant non-lending relationship where it is owed a money debt (not from lending) and a discount arises from that debt — typically where deferred payment on a sale exceeds the price that would have been paid upfront
• Where the debt represents consideration for selling property, two additional conditions must be satisfied: the property must not be a loan relationship asset or derivative contract already dealt with under group transfer or other specific rules (Condition A), and the debt must not already be taxable as a trading receipt (Condition B)
• A discount is taken to arise where property is sold with deferred payment terms and the total consideration exceeds what would have been paid at the time of sale, with the excess reasonably representing a return on an investment of money at interest
• The discount can be either revenue or capital in nature, and the section is subject to an exclusion where profits or losses from the debt already fall within the derivative contracts or intangible fixed assets rules