What does section 486G of the Corporation Tax Act 2009 do?

Section 486G requires consideration paid for transferring the right to receive relevant receipts to be treated as a money debt owed to the transferee. The transfer is deemed a money-lending transaction, bringing the entire arrangement within the loan relationships regime under Part 5 of CTA 2009 for corporation tax purposes.

How is the consideration treated under section 486G CTA 2009?

The consideration paid by the transferee is treated as a money debt owed to them by the person liable to make the underlying payments. The transfer itself is deemed a lending of money. This fiction ensures profits, gains, or losses are computed as loan relationship credits or debits rather than under other tax rules.

What are relevant receipts for the purposes of section 486G?

Relevant receipts are defined in section 752(2) of the Corporation Tax Act 2010 and section 809AZA(2) of the Income Tax Act 2007. They refer to certain income streams, such as royalty payments, whose right to receipt can be transferred. Accountants should consult those provisions to determine whether a particular income stream qualifies.

What is the practical effect of the deemed loan relationship under section 486G?

The practical effect is that any returns, gains, or losses from the arrangement are taxed under the loan relationships rules in Part 5 of CTA 2009. For example, the difference between the lump sum consideration and total receipts over time is taxed as a loan relationship credit, spread over the payment period.

Corporation Tax Act 2009 section 486G

Consideration to be treated as loan relationship

Section 486G requires the consideration paid for transferring the right to receive certain income streams (known as "relevant receipts") to be treated as if it were a loan relationship for corporation tax purposes.

When a company transfers its right to receive relevant receipts, the consideration paid is treated as a money debt owed to the transferee
The debt is treated as being owed by the person who is obligated to pay the relevant receipts
The transfer itself is treated as a money-lending transaction from which the debt arises
This brings the arrangement within the loan relationships rules, meaning profits and losses are taxed accordingly under Part 5 of CTA 2009

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