Taxation of Chargeable Gains Act 1992 section 151P

Purchase and resale arrangements

Section 151P defines how to calculate the "alternative finance return" element within purchase and resale arrangements, which is essentially the profit margin built into the resale price that functions as an equivalent to interest in a conventional loan.

• In a purchase and resale arrangement, part of the second (higher) purchase price is treated as alternative finance return — effectively the financing charge embedded in the transaction.
• Where the second purchase price is paid in a single lump sum, the alternative finance return is simply the difference between the second purchase price and the first purchase price.
• Where the second purchase price is paid by instalments, the alternative finance return in each instalment is calculated by treating the arrangement as if it were a conventional arm's length loan, with interest equal to the overall price difference spread across the instalments in the same way a lender would apportion interest under generally accepted accounting practice.
• All key terms used in this section carry the same meaning as in section 151J, which sets out the basic framework for purchase and resale arrangements.