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The disguised interest legislation is set out at CTA 2009, ss 486A–486E (Pt 6, Ch 2A). Its aimis to ensure that the return on a transaction which is designed to produce an interest-like return and which has a tax avoidance purpose (see below) is taxed under the loan relationships legislation.

The legislation applies, subject to a number of exclusions (see below) where:

1. Ìý

   •ÌýÌýÌýÌý a company is a party to an arrangement which produces a return for the company on any amount which is economically equivalent to interest (see below)¹ or

2. Ìý

   •ÌýÌýÌýÌý two or more persons are party to an arrangement which produces a return which is economically equivalent to interest for the persons taken together but not for either of them individually. Where a company is a party to such arrangements its share of the return, determined on a just and reasonable basis, is treated as a profit arising from a loan relationship²

An arrangement for these purposes is defined as including any agreement, understanding, scheme, transaction or series of transactions (whether