CITM7122 - Withdrawal of Relief: When value is not received – deposits by CDFI in the course of ordinary banking arrangements

FA02/SCH16/PARA35

One of the obvious sources of funding for a CDFI is its own bank. And the most obvious home for any funds raised by the CDFI for the period between raising the funds and investing them on to the enterprises which it finances is that same bank. But without special provision deposits made by a CDFI in the course of its ordinary banking transactions may reduce or eliminate the value of any relief available to the bank in respect of investments made under the scheme. This anomaly was corrected, with full retrospective effect, by Section 54 of Finance Act 2008.

Where an investor in a Community Development Finance Institution (CDFI) is a bank, any deposits made by the CDFI with the bank in the course of its ordinary banking arrangements will not be treated as a receipt of value for the purposes of FA02/SCH16/PARA35.

In this context 'bank' takes is meaning from section ICTA88/s840A.

Meaning of 'ordinary banking arrangements'

'Ordinary banking arrangements’ means arrangements of a kind that one would expect to see entered into between a bank and a CDFI as part of their day-to-day banking transactions.