Corporation Tax Act 2010 section 767

Type 3 finance arrangement defined

Section 767 defines what constitutes a "type 3 finance arrangement" involving an existing partnership that enters into a financing arrangement where a lender joins the partnership and receives a share of profits linked to an underlying asset.

• A type 3 finance arrangement arises where an existing partnership already holds an asset (the security), receives money or another asset (the advance) from a lender, and a relevant change occurs in the partnership's membership
• The person involved in the partnership change must have their profit share determined wholly or partly by reference to payments relating to the security, and it does not matter whether this profit share determination is subject to any condition
• The partnership's accounts (or those of any pre-existing member) must record a financial liability for the advance under generally accepted accounting practice, and the payments in respect of the security must reduce that liability
• Unlike a type 2 finance arrangement, the partnership must not have been formed for the purposes of the arrangement, and there is no requirement for a transfer of an asset or a transferor