Commentary on Sections Regulation of loans Section 71G Valuation of regulated transaction
321.Section 71G defines how regulated transactions are to be valued. The value of a regulated transaction is relevant to whether the regime applies at all (it does not apply to transactions of £200 or under – section 71F(12)) and to the reporting requirements (section 71M).
322.Subsection (1) provides that the value of a loan it is the value of the total amount to be lent (that is the capital, not including any interest charged).
323.Subsection (2) provides that the value of a credit facility is the maximum which may be borrowed under the arrangement (e.g. if an overdraft has a limit of £250,000, this is the value of the transaction, not the amounts advanced from time to time under the overdraft).
324.Subsection (3) provides that the value of a regulated transaction which is a security is the contingent liability assumed by the person providing the security (e.g. if A lends £100,000 to a political party on the basis of a guarantee from B limited to £50,000, the value of the regulated transaction comprising the security would be £50,000; the loan from A would constitute a separate regulated transaction of the value of £100,000).
325.Subsection (4) provides that where a loan or credit facility provides at the outset for capitalisation (i.e. for unpaid interest to be added to the capital outstanding on the loan), the potential for capitalisation is not to be considered in valuing the loan or credit facility.