Section 809BZE | Deemed interest if borrower is a partnership ^F1

(1)This section applies if each of conditions A to C is met.

(2)Condition A is that—

(a)there is a type 1 finance arrangement, and

(b)the borrower is a partnership.

(3)Condition B is that—

(a)the arrangement is prevented by section 809BZB from having the relevant effect in relation to a person who is a member of the partnership, or

(b)section 809BZC applies to the partnership (in which event “the person” in subsections (4) and (5) means the person within the charge to income tax who is a member of the partnership).

(4)Condition C is that in accordance with generally accepted accounting practice the person's accounts, or the partnership's accounts, record an amount as a finance charge in respect of the advance.

(5)For income tax purposes the person may treat the amount as interest payable by the partnership on a loan.

(6)If an amount is treated as interest (“deemed interest”) under subsection (5), to find out when it is paid—

(a)treat the payments mentioned in section 809BZA(2)(c) as consisting of amounts for repaying the advance and amounts (“the interest elements”) in respect of interest on the advance,

(b)treat the interest elements of the payments as paid when the payments are paid, and

(c)treat the deemed interest as paid at the times when the interest elements are treated as paid.