December 2006 - Guidelines for Political Parties on donations and prohibited donations

4. Loans to political parties

Where a loan is provided to a political party by a financial institution and the normal rules attaching to such loans apply, the loan is not regarded as a donation to the party. However, where a loan is provided to a political party by a financial institution in circumstances where either the interest charged is less than the lowest rate available from the financial institution or the loan is not repaid in accordance with the terms and conditions under which the loan was issued or is only partially repaid, the benefit to the party may be regarded as a donation and may, therefore, be subject to the disclosure and maximum limits applying to the acceptance of donations.

Where an individual or body, who or which is not a financial institution, gives a loan to a political party, it must be evident that the loan offered is a bona fide loan. In that regard the following would apply:

• As with a loan from a financial institution, the terms and conditions applying to the loan and its repayment must be stated clearly in writing.
• Interest is chargeable on the loan at a rate (whether fixed or variable) which reflects the interest charged by financial institutions on loans of a similar amount and duration. Where the interest charged is less than the lowest rate available from a financial institution, the benefit accruing from the difference in rates is regarded as a donation to the party.
• The Standards Commission may require sight of the terms and conditions, including the interest charge, applying to the loan and may require confirmation that the loan has been repaid in accordance with these terms and conditions.
• If the loan is not repaid in accordance with the terms and conditions, or is only partly repaid, the benefit of such non-repayment may be regarded as a donation to the party.

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