(a) the section which would have applied as mentioned in paragraph
18(1)(d) above is section 196D of FA 2004, and

(b) any relevant change in relation to the partnership would have the
relevant effect (ignoring this paragraph).

(2) 5In such a case—

(a) Part 9 of ITTOIA 2005 or sections 1259 to 1265 of CTA 2009 (as the
case may be) is or are to have effect in relation to the transferor, or
any person connected with the transferor, as if the relevant change in
relation to the partnership had not occurred, and

(b) 10accordingly, the asset-backed arrangement is not to have the relevant
effect.

(3) The relevant effect is that—

(a) an amount of income on which the transferor, or the person
connected with the transferor, would otherwise have been charged
15to tax is not so charged,

(b) an amount which would otherwise have been brought into account
in calculating for tax purposes any income of the transferor, or the
person connected with the transferor, is not so brought into account,
or

(c) 20the transferor, or the person connected with the transferor, becomes
entitled to deduct an amount—

(i) in calculating income for tax purposes, or

(ii) from total income or total profits (as the case may be).

(4) In sub-paragraph (3) “amount” means an amount which arises on or after 22
25February 2012 but on or before the completion day.

(5) In deciding whether sub-paragraph (1)(b) is met assume that amounts of
income equal to the payments mentioned in section 196D(2)(g) of FA 2004
were payable to the partnership before the relevant change in relation to it
occurred.

25 (1) 30This paragraph applies if—

(a) the section which would have applied as mentioned in paragraph
18(1)(d) above is section 196F of FA 2004, and

(b) any relevant change in relation to the partnership would have the
relevant effect (ignoring this paragraph).

(2) 35The relevant effect is that—

(a) an amount of income on which a relevant member would otherwise
have been charged to tax is not so charged,

(b) an amount which would otherwise have been brought into account
in calculating for tax purposes any income of a relevant member is
40not so brought into account, or

(c) a relevant member becomes entitled to deduct an amount—

(i) in calculating income for tax purposes, or

(ii) from total income or total profits (as the case may be).

(3) A relevant member is a person who—

(a) 45was a member of the partnership immediately before the relevant
change in relation to it occurred, and

(b) is not the lender.

(4) In sub-paragraph (2) “amount” means an amount which arises on or after 22
February 2012 but on or before the completion day.

(5) If this paragraph applies—

(a) Part 9 of ITTOIA 2005 or sections 1259 to 1265 of CTA 2009 (as the
5case may be) is or are to have effect in relation to any relevant
member as if the relevant change in relation to the partnership had
not occurred, and

(b) accordingly, the asset-backed arrangement is not to have the relevant
effect.

(6) 10In deciding whether sub-paragraph (1)(b) is met assume that amounts of
income equal to the payments mentioned in section 196F(2)(e) of FA 2004
were payable to the partnership before the relevant change in relation to it
occurred.

26 (1) This paragraph applies if, apart from this Part of this Schedule, a relevant
15charging provision applies in relation to the asset-backed arrangement.

(2) The relevant charging provision is to apply in relation to the asset-backed
arrangement instead of paragraph 23, 24 or 25 above (as the case may be) to
the extent of any overlap.

(3) In this paragraph “relevant charging provision” means—

(a) 20section 809BZB, 809BZC, 809BZH or 809BZK of ITA 2007, or

(b) section 759, 760, 765 or 768 of CTA 2010.

27 (1) This paragraph applies if, apart from this Part of this Schedule—

(a) a relevant interest provision applies in relation to the asset-backed
arrangement, and

(b) 25as a result of the application of the relevant interest provision in
relation to the asset-backed arrangement, an amount is or may be
treated as interest under that provision.

(2) Without prejudice to the generality of paragraphs 23(3) and (4), 24(3) and
25(2), the amount is not to be treated as interest if the amount arises on or
30after 22 February 2012 but on or before the completion day.

(3) In this paragraph “relevant interest provision” means—

(a) section 809BZD, 809BZE, 809BZI or 809BZL of ITA 2007, or

(b) section 761, 762, 766 or 769 of CTA 2010.

28 (1) Section 196G of FA 2004 (as inserted by paragraph 1 above) does not apply
35in relation to E’s contribution (if it would otherwise do so) if the relevant
event occurs on or after 22 February 2012.

(2) Section 196H of FA 2004 (as inserted by paragraph 1 above) does not apply
in relation to E’s contribution at all (if it would otherwise do so).

Adjustments

29 (1) 40For the purposes of paragraphs 30 and 31—

(a) amount A is the total amount of relief given in respect of E’s
contribution,

(b) amount B is the total of the following amounts—

(i) any amounts of income which are charged to tax by virtue of
45a relevant provision,

(ii) any amounts brought into account in calculating income for
tax purposes by virtue of a relevant provision (so far as not
reflected in sub-paragraph (i)), and

(iii) any amounts stopped from being the subject of an income
5deduction by virtue of a relevant provision (so far as not
reflected in sub-paragraph (i) or (ii)), and

(c) subject to sub-paragraph (9), amount C is the amount of the payment
mentioned in sub-paragraph (6) or (8) (as the case may be) so far as
the payment—

(i) 10is made under the asset-backed arrangement on the
completion day,

(ii) is not reflected in amount B,

(iii) is not the subject of an income deduction, and

(iv) is not a contribution paid by E under the relevant scheme but
15nevertheless becomes (directly or indirectly) part of the sums
held for the purposes of the relevant scheme.

(2) In sub-paragraph (1)(b) “relevant provision” means—

(a) paragraph 23, 24 or 25 above (as the case may be);

(b) a relevant charging provision (as defined in paragraph 26 above) as
20applied in relation to the asset-backed arrangement for amounts
arising on or before the completion day;

(c) paragraph 27 above (if applicable).

(3) No amount is to be included in amount B by virtue of sub-paragraph (2)(c)
so far as it is reflected in an amount included in amount B by virtue of sub-
25paragraph (2)(a) or (b).

(4) In sub-paragraph (1) “income deduction” means a deduction to which any
person is entitled—

(a) in calculating income for tax purposes, or

(b) from total income or total profits.

(5) 30Sub-paragraph (6) applies if the section which would have applied as
mentioned in paragraph 18(1)(d) above is section 196B of FA 2004.

(6) The payment referred to in sub-paragraph (1)(c) is the payment (if any)
which the borrower, or a person connected with the borrower, makes to the
lender, or a person connected with the lender, in order to acquire—

(a) 35the security, or

(b) any asset substituted for the security under the asset-backed
arrangement.

(7) Sub-paragraph (8) applies if the section which would have applied as
mentioned in paragraph 18(1)(d) above is section 196D or 196F of FA 2004.

(8) 40The payment referred to in sub-paragraph (1)(c) is the payment (if any)
which E, or a person connected with E, makes to the lender, or a person
connected with the lender, in order to reverse the relevant change in relation
to the partnership.

(9) Amount C is to be taken to be nil if—

(a) 45on or before the completion day, a commitment (whether or not
legally enforceable and whether or not subject to any conditions) is
given (directly or indirectly) to a relevant person, and

(b) the commitment—

(i) is a commitment to secure that a person receives money or
another asset, and

(ii) is linked (directly or indirectly) to the making of the payment
5covered by amount C.

(10) In sub-paragraph (9)(a) “relevant person” means—

(a) E;

(b) a person connected with E;

(c) a person acting (directly or indirectly) at the direction or request, or
10with the agreement, of E or a person connected with E;

(d) a person chosen (directly or indirectly) by E or a person connected
with E;

(e) a person within a class of person chosen (directly or indirectly) by E
or a person connected with E;

(f) 15a partnership.

(11) But “relevant person” does not include—

(a) the persons who from time to time are the trustees of the relevant
scheme, or

(b) the persons who from time to time are the persons controlling the
20management of the relevant scheme,

in their capacity as such.

30 (1) This paragraph applies if amount A exceeds the sum of amounts B and C.

(2) The amount of the excess is treated as follows as relevant—

(a) for corporation tax purposes, the amount is treated as if it were a
25profit which E has in respect of E’s loan relationships chargeable to
corporation tax under section 299 of CTA 2009 for E’s accounting
period in which the beginning of the completion day falls, or

(b) for income tax purposes, the amount is treated as if it were an
amount of income of E chargeable to income tax under Chapter 8 of
30Part 5 of ITTOIA 2005 for the tax year in which the beginning of the
completion day falls.

31 If the sum of amounts B and C exceeds amount A—

(a) E is to be treated as having paid a contribution under the relevant
scheme in respect of any individual of an amount equal to the excess,

(b) 35the contribution is to be treated as having been paid at the beginning
of the completion day, and

(c) E is to be given relief as provided for by section 196 of FA 2004
accordingly.

Part 5 40Other provision relating to finance arrangements

Chapter 5B of Part 13 of ITA 2007

32 Chapter 5B of Part 13 of ITA 2007 (finance arrangements) is amended as
follows.

33 In section 809BZA (type 1 finance arrangements: definition) after subsection