Corporation Tax Act 2010 section 257

Purchase and resale arrangements

Section 257 explains how the Community Investment Tax Relief rules apply to alternative finance purchase and resale arrangements, treating them as equivalent to conventional loan transactions.

• Where a first purchaser buys an asset and sells it on to a second purchaser under qualifying alternative finance arrangements, the first purchaser is treated as making a loan to the second purchaser equal to the original purchase price.
• If the asset is transferred in instalments, each instalment is treated as a drawdown of the loan, with the date of the first instalment being the date the loan begins and the cumulative value of instalments representing the amount drawn down at any given date.
• Each payment by the second purchaser towards the resale price, after deducting any alternative finance return element, is treated as a repayment of loan capital, and the person entitled to receive the resale price is treated as the beneficial owner of the loan.
• Where such arrangements qualify as Community Investment Tax Relief investments, the specific rule about receipt of value relating to purchase and resale arrangements is disapplied to avoid a double penalty.