Section 642 | Exception for certain loans or repayments of loans

(1)Section 641 does not apply to any sum paid to the settlor by way of loan or repayment of a loan if conditions A and B are met.

(2)Condition A is that the whole of the loan is repaid within 12 months of the date on which it was made.

(3)Condition B is that the period for which amounts are outstanding in respect of relevant loans in any period of 5 years is not more than 12 months.

(4)In subsection (3) “relevant loans” means loans made—

(a)to the settlor by the body corporate connected with the settlement or by any other body corporate so connected, or

(b)by the settlor to the body corporate connected with the settlement or to any other body corporate so connected.