Income Tax Act 2007 section 809BZL

Deemed interest

Section 809BZL allows a partnership member to treat a finance charge arising from a type 3 finance arrangement as interest on a loan for income tax purposes, potentially qualifying for income tax relief.

• Where a type 3 finance arrangement exists and the partnership's accounts (or a relevant member's accounts) record a finance charge under generally accepted accounting practice, a relevant member within the charge to income tax may treat that charge as interest payable on a loan
• A "relevant member" is someone who was a member of the partnership immediately before the relevant change occurred and who is not the lender
• The deemed interest is treated as paid at the times the interest elements within the repayment instalments are actually paid
• If the conditions are met, the deemed interest may qualify for income tax relief under the rules for interest payments in Part 8 of the Income Tax Act 2007