Income Tax Act 2007 section 809BZK

Certain tax consequences not to have effect

Section 809BZK prevents certain favourable tax consequences from arising for existing partnership members where a type 3 finance arrangement involves a relevant change to the partnership.

• Where a type 3 finance arrangement exists and a relevant change to the partnership would otherwise produce a tax benefit for existing members (other than the lender), this section blocks that benefit from taking effect.
• The blocked tax benefits include: income escaping an income tax charge, amounts dropping out of the income tax computation, or a member gaining an income deduction — whether a deduction in calculating income or a deduction from total income.
• A "relevant member" protected by this rule is any person who was a partner immediately before the relevant change occurred and who is not the lender in the arrangement.
• The partnership tax rules in Part 9 of ITTOIA 2005 apply to each relevant member as though the relevant change had never happened, so the finance arrangement cannot produce the favourable tax consequences.