Income Tax (Earnings and Pensions) Act 2003 section 173A

Alternative finance arrangements

Section 173A ensures that alternative finance arrangements provided by an employer to an employee are taxed in the same way as beneficial loans under the benefits code, so that they are treated no more or less favourably than conventional interest-bearing loans.

• Certain alternative finance arrangements — specifically purchase and resale arrangements, and diminishing shared ownership arrangements — are treated as loans for the purposes of the employment income benefits code
• References to interest in the benefits code include alternative finance return when applied to these arrangements, ensuring equivalent tax treatment
• The amount outstanding under these arrangements is calculated as the purchase price (or original beneficial interest) minus the capital element of payments made, excluding any amount representing alternative finance return
• These rules apply only to arrangements entered into on or after 22 March 2006