Finance Act 1976

11 (1) Where for any year no interest is paid on a loan but had interest been paid on it at the official rate part of that interest would have been eligible for relief, the calculation of the cash equivalent under Part II of this Schedule shall be modified as provided by paragraph 10(a) or (b) above with the substitution for the references to the amounts of interest paid or not eligible for relief of references to the amounts (ascertained in accordance with the following provisions of this paragraph) which would have been paid or would not have been eligible for relief.

(2) For the purposes of paragraph 10(a) as applied by this paragraph, the whole amount of interest at the official rate which would have been paid for any year shall be taken to be the amount payable for that year calculated in accordance with paragraph 6 (disregarding paragraph 10); and the amount of that interest which would not have been eligible for relief shall be ascertained—

(a) by finding that amount on the assumption that the amount referred to in paragraph 6(a)(i) was the amount outstanding for the whole year ;

(b) by finding that amount on the assumption that the amount referred to in paragraph 6(a)(ii) was the amount outstanding for the whole year ; and

(c) by adding together the resulting figures and dividing by 2.

(3) For the purposes of paragraph 10(b) as applied by this paragraph, the amount of interest which would have been paid and the amount of it which would not have been eligible for relief shall be ascertained on the assumption that interest at the official rate was paid daily throughout the year on the maximum amount outstanding on each day.