Finance Bill (HC Bill 102)

(b) the loan was made on or after 6 April 1999, and

(c) 25before the end of 5 April 2019, A or B acquires (whether or not for
consideration) a right to payment of the whole or part of the loan.

(2) The amount of the loan in respect of which A or B acquires a right to
payment is to be treated—

(a) for the purposes of paragraph 1(1) as an amount, of the loan made by
30P to the relevant person, that is outstanding immediately before the
end of 5 April 2019;

(b) for the purposes of paragraph 1(4) and section 554Z3(1) of ITEPA
2003, as an amount of the loan that is outstanding at the time P is
treated as taking the relevant step under paragraph 1(1).

(3) 35Where a quasi-loan or a loan made by P to a relevant person is replaced,
directly or indirectly, by a loan or another loan (the “replacement loan”),
references in sub-paragraphs (1) and (2) to the loan are references to the
replacement loan.

Meaning of “outstanding”: loans in currencies other than sterling

6 (1) 40In paragraphs 7 to 10 “the loan currency”, in relation to a loan, means the
currency in which the initial principal amount of the loan is denominated
(whether or not that amount is paid in that currency).

(2) For the purposes of paragraphs 7 to 10, the value of an amount in a particular
currency is to be determined by reference to an appropriate spot rate of
45exchange.

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7 (1) This paragraph applies in relation to a loan where the loan currency is a
currency other than sterling.

(2) But this paragraph does not apply if paragraph 10 applies in relation to the
loan.

(3) 5The amount of the loan that is outstanding, at the time P is treated as taking
the relevant step, is to be calculated in sterling as follows—

Step 1

Calculate, in the loan currency, the amount that is outstanding at that time.

Step 2

10Take the value in sterling, at that time, of that amount.

(4) See paragraph 8 for provision about repayments made in a currency other
than the loan currency.

Repayments in currencies other than the loan currency

8 (1) This paragraph applies in relation to a loan where—

(a) 15payments in money are made by way of repayment of principal
under the loan, and

(b) some or all of the payments are made in a currency other than the
loan currency.

(2) But this paragraph does not apply if paragraph 10 applies in relation to the
20loan.

(3) For the purposes of calculating the repayment amount in relation to the loan,
the amount of each of the payments referred to in sub-paragraph (1)(b) is an
amount equal to its value in the loan currency on the date it is made.

Loans made in a depreciating currency

9 (1) 25Paragraph 10 applies in relation to a loan where—

(a) the loan currency is a currency other than sterling, and

(b) it is reasonable to suppose that the main reason, or one of the main
reasons, for the loan being made in that currency is that the loan
currency is expected to depreciate as against sterling during the loan
30period.

(2) The “loan period”, in relation to a loan, is the period—

(a) beginning at the time the loan is made, and

(b) ending with the time by which, under the terms of the loan, the
whole of the loan is to be repaid.

10 (1) 35Where this paragraph applies in relation to a loan—

(a) paragraphs 7 and 8 do not apply in relation to the loan, and

(b) sub-paragraphs (2) to (5) apply for the purposes of calculating the
amount of the loan that is outstanding at the time P is treated as
taking the relevant step.

(2) 40The relevant principal amount, in relation to the loan, is an amount equal to
the total of—

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(a) the value in sterling, at the reference date, of the initial principal
amount lent, and

(b) the value in sterling, at the reference date, of any sums that become
principal under the loan, otherwise than by capitalisation of interest.

(3) 5The “reference date”—

(a) in relation to an amount within sub-paragraph (2)(a), means the date
on which the loan is made, and

(b) in relation to a sum within sub-paragraph (2)(b), means the date on
which the sum becomes principal.

(4) 10The repayment amount, in relation to the loan, is an amount equal to the
total of—

(a) the amount of principal under the loan that has been repaid in
sterling, and

(b) where payments are made, in a currency other than sterling, by way
15of repayment of principal under the loan, the amount equal to the
sterling value of the payments.

(5) The “sterling value” of a payment is its value in sterling on the date it is
made.

Meaning of “outstanding”: quasi-loans

11 (1) 20An amount of a quasi-loan is outstanding for the purposes of paragraph 1 if
the initial debt amount exceeds the repayment amount.

(2) In sub-paragraph (1) “initial debt amount”, in relation to a quasi-loan, means
the total of—

(a) an amount equal to the value of the acquired debt (see paragraph
252(2)), and

(b) where P subsequently acquires a further right (an “additional debt”)
to a payment, or transfer of assets, in connection with the payment
mentioned in paragraph 2(3)(a) or (as the case may be) the transfer
mentioned in paragraph 2(3)(b), an amount equal to the value of the
30additional debt.

(3) For the purposes of sub-paragraph (2)

(a) where the acquired debt is a right to payment of an amount, the
“value” of the debt is that amount,

(b) where the additional debt is a right to payment of an amount, the
35“value” of the debt is that amount, but is nil if the additional debt
accrued to P by the capitalisation of interest on the acquired debt or
another additional debt, and

(c) where the acquired debt or additional debt is a right to a transfer of
assets, the “value” of the debt is an amount equal to—

(i) 40the market value of the assets at the time the right is acquired
(or the value of the right at that time if the assets are non-
fungible and not in existence at that time), or

(ii) if higher, the cost of the assets at that time.

(4) In sub-paragraph (1) “repayment amount”, in relation to a quasi-loan, means
45the total of—

(a) the amount (if any) by which the initial debt amount has been
reduced (by way of repayment) before 17 March 2016,

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(b) payments in money (if any) made by the relevant person on or after
17 March 2016 by way of repayment of the initial debt amount, and

(c) if the acquired debt or an additional debt is a right to a transfer of
assets, and the assets have been transferred, an amount equal to the
5market value of the assets at the time of the transfer.

12 (1) A payment or transfer is to be disregarded for the purposes of paragraph
11(4)(b) or (c) if—

(a) there is any connection (direct or indirect) between the payment or
transfer and a tax avoidance arrangement (other than the
10arrangement under which the quasi-loan was made), or

(b) the payment or the asset transferred, or a sum or asset directly or
indirectly representing the payment or asset, is the subject of a
relevant step (as defined in section 554A(2) of ITEPA 2003) that is
taken—

(i) 15after the payment is made or the asset transferred, but

(ii) before the end of 5 April 2019.

(2) But a payment or transfer is not to be disregarded under sub-paragraph
(1)(b) if, by the end of 5 April 2019, each relevant tax liability has been paid
in full.

(3) 20For the purposes of this paragraph, each of the following is a “relevant tax
liability”—

(a) any liability for income tax arising by virtue of the application of
Chapter 2 by reason of the relevant step mentioned in sub-paragraph
(1)(b), and

(b) 25where section 554Z6 of ITEPA 2003 (overlap with certain earnings)
applies because that relevant step gives rise to relevant earnings for
the purposes of that section, any liability for income tax in respect of
those relevant earnings.

(4) Sub-paragraph (5) applies if a payment is disregarded under sub-paragraph
30(1)(b).

(5) The value of the relevant step treated as taken by paragraph 1 is not reduced
under section 554Z5(3) of ITEPA 2003 (overlap with money or asset subject
to earlier tax liability) by the amount of the sum, or the value of the asset,
which is the subject of the relevant step mentioned in sub-paragraph (1)(b)
35unless the payment condition is met by reason of section 554Z5(4)(a) and
(b)(ii) being met.

13 (1) This paragraph applies where—

(a) a person (“P”) has made a quasi-loan to a relevant person,

(b) the quasi-loan was made on or after 6 April 1999, and

(c) 40before the end of 5 April 2019, A or B acquires (whether or not for
consideration) a right to the payment or transfer of assets mentioned
in paragraph 2(2)(a).

(2) The amount equal to the value of the right acquired by A or B is to be
treated—

(a) 45for the purposes of paragraph 1(1) as an amount, of the quasi-loan
made by P to the relevant person, that is outstanding immediately
before the end of 5 April 2019;