Corporation Tax Act 2009 section 520

Provision not at arm's length: non-deductibility of relevant return

Section 520 prevents a company from claiming a tax deduction for returns paid under arrangements that fail the arm's length test and are therefore excluded from being treated as alternative finance arrangements.

• Where arrangements would qualify as alternative finance arrangements but are excluded because they are not on arm's length terms (under section 508), this section applies to deny tax relief on returns paid.
• A company paying a relevant return under such excluded arrangements cannot deduct that return when calculating its profits or gains for corporation tax purposes.
• The company also cannot deduct the relevant return from its total profits.
• "Relevant return" carries the same meaning as defined in section 508, which broadly covers the financial return paid under the arrangements.