Corporation Tax Act 2009 section 512

Diminishing shared ownership arrangements

Section 512 defines which payments made by the customer under diminishing shared ownership arrangements count as alternative finance return for corporation tax purposes, and which payments are excluded from that treatment.

• Payments made by the customer under diminishing shared ownership arrangements are generally treated as alternative finance return — meaning they are taxed in a similar way to interest on a conventional loan.
• Payments that represent the consideration for acquiring the financier's beneficial interest in the asset (i.e. the capital element used to gradually buy out the financier's share) are not alternative finance return.
• Payments that relate to arrangement fees, legal expenses or other expenses that the customer is required to pay under the arrangements are also excluded from being alternative finance return.
• The term "the customer" takes its meaning from sections 504 and 504A, which set out the detailed conditions for diminishing shared ownership arrangements and their refinancing.