Corporation Tax Act 2009 section 503

Purchase and resale arrangements

Section 503 defines the first type of alternative finance arrangement, where an asset is bought and immediately resold at a higher price with deferred payment, so that the price difference functions as an interest-equivalent return.

• The arrangement involves two parties — a first purchaser and a second purchaser — where at least one is a financial institution or the deal is facilitated through a regulated peer-to-peer lending platform.
• The first purchaser buys an asset and sells it on to the second purchaser, either immediately or, where the first purchaser is a financial institution that acquired the asset specifically for this purpose, shortly afterwards.
• The second purchase price exceeds the first purchase price, with all or part of that higher price payable at a later date, and the excess is equivalent in substance to a return on an investment at interest.
• These rules are disapplied where the terms of the arrangement are not at arm's length, under section 508.