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EXPLANATORY NOTE CLAUSE 130: LOAN CAPITAL WHERE RETURN BEARS INVERSE
RELATIONSHIP TO RESULTS SUMMARY This clause brings ‘ratchet
loans’, where the interest rate falls as business results improve
(or, conversely, the interest rate increases as business results deteriorate),
within the scope of the stamp duty loan capital exemption with effect
from 21 March 2000. _________________ DETAILS OF THE CLAUSE Subsection (1) provides that section 79 of Finance Act 1986 (loan capital) will be amended. New subsection (7A) allows a ratchet loan to qualify for the exemption from stamp duty for transfers of loan capital contained in subsection 79(4). Subsection (2) and Subsection (3) are commencement provisions which bring the extension of the loan capital exemption into effect from 21 March 2000. ____________________ BACKGROUND Transfers of most loan capital are exempt from stamp duty and stamp duty reserve tax (S79 FA 1986), but ratchet loans are currently unable to benefit from this exemption (Section 79(6)(b) FA 1986). This clause amends the definition of exempt loan capital so that ratchet loans may qualify for exemption. ____________________________________________________ |
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