Taxation (International and Other Provisions) Act 2010 Schedule 2 Part 2

New Chapter 4 of Part 4 of TCGA 1992 (paragraphs 27–45)

Schedule 2 Part 2 inserts a new Chapter 4 into Part 4 of the Taxation of Chargeable Gains Act 1992, establishing the capital gains tax rules for alternative finance arrangements — structures designed to produce returns economically equivalent to interest without charging interest directly.

• Five types of alternative finance arrangement are defined: purchase and resale, diminishing shared ownership, deposit, profit share agency, and investment bond arrangements — each involving a financial institution and producing a return that equates in substance to interest on a loan.
• The "alternative finance return" element under each arrangement type is identified and separated from the underlying asset transaction, so that it is excluded from the capital gains tax computation of sale consideration and instead treated like interest.
• Investment bond arrangements receive special capital gains tax treatment: they are classified as qualifying corporate bonds (and therefore securities), the bond-holder has no interest in the underlying bond assets, and the arrangements are not treated as unit trust schemes, offshore funds, or partnerships.
• An anti-avoidance rule excludes arrangements from alternative finance treatment where the terms are not at arm's length and an affected person receives the return free of UK or equivalent foreign tax.