Corporation Tax Act 2009 section 508

Provision not at arm's length: exclusion of arrangements from sections 503 to 507

Section 508 removes the favourable alternative finance treatment from certain arrangements where connected parties are not dealing at arm's length and the recipient of the return is not taxed on it.

• Where transfer pricing rules apply to alternative finance arrangements between connected parties, those arrangements may lose their status as alternative finance arrangements
• The exclusion is triggered when an affected person receives (or is entitled to) the alternative finance return but is not subject to UK income tax, corporation tax, or any equivalent foreign tax on that return
• The exclusion covers all five types of alternative finance arrangement: purchase and resale, diminishing shared ownership, deposit, profit share agency, and investment bond arrangements
• The rule also catches back-to-back structures where an intermediary sits between the two main parties, so that amounts representing the alternative finance return are also caught