Non UK Trust - Interest not being paid

Quite a complex one, ill try and break it down;

Non Dom settlor, settled non UK Trust
During Trusts existence he was irrevocably excluded from benefit
Trusts assets consisted of non UK sited assets
Settlor purchased all assets at market value from Trustees, however, no cash ever exchanged hands, as Trustees loaned settlor money to do so
Interest is being accrued - but not physically paid.
Trust has no other source of income

We questioned s720 - answer - no benefit as interest being charged on loan
We questioned s87 tcga - answer - gains within Trust but no capital payment to beneficiary to be matched
We questioned s633; settlor received ‘capital sum’ should be matched to undistributed income of the Trust, i.e. the interest being paid on the loan - answer - no income being received by the Trustees therefore nothing to match a s633 charge to.

Question, is it correct that on one side legislation isn’t applying because there is no benefit due to interest being charged, but on the other hand because that said interest isn’t actually being paid the other anti avoidance legislation also doesn’t apply

Does anyone know HMRC’s view on interest being accrued but not paid!?

Claire Spinks
British Taxpayers