Income Tax Act 2007 section 564R

Treatment of discount

Section 564R explains how to treat the discount element of additional payments made under alternative finance investment bond arrangements.

• Where part of the additional payments under investment bond arrangements is excluded from being alternative finance return because it is equivalent in substance to a discount, this section applies
• The discount element is taxed under the normal rules for discounts (section 381 of ITTOIA 2005), unless the arrangements qualify as deeply discounted securities
• If the arrangements are deeply discounted securities, the discount element is instead taxed under the deeply discounted securities rules in Chapter 8 of Part 4 of ITTOIA 2005
• The term "additional payments" carries the same meaning as in section 564G of the Income Tax Act 2007, which defines the payments made under investment bond arrangements