Finance Act 1996

97 Manufactured interest. U.K.

(1) [F1 For the purposes of the Corporation Tax Acts, a company has a relationship to which this section applies in any case where—]

(a) any amount (“manufactured interest”) is payable by or on behalf of, or to, [F2 the company] under any contract or arrangements relating to the transfer of an asset representing a loan relationship; and

(b) that amount is, or (when paid) will fall to be treated as, representative of interest under [F3 that loan relationship](“the real interest”).

[F4 and references to a relationship to which this section applies, and to a company’s being party to such a relationship, shall be construed accordingly]

[F5 (2) Where a company has a relationship to which this section applies—

(a) this Chapter shall have effect in relation to the company and the manufactured interest under the relationship—

(i) as it would have effect if the manufactured interest were interest payable on a loan by, or (as the case may be) to, the company and were accordingly interest under a loan relationship to which the company is a party, and

(ii) where that company is the company to which the manufactured interest is payable, as if that relationship were the one under which the real interest is payable, F6 ...

F7 (b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

and, subject to [F8 paragraph (a)(ii)] above, references in the Corporation Tax Acts to a loan relationship accordingly include a reference to a relationship to which this section applies.]

[F9 (2A) Where a company—

(a) has a relationship to which this section applies, but

(b) enters into a related transaction in respect of the right to receive manufactured interest,

then, for the purpose of bringing credits into account by virtue of subsection (2) above in respect of that or any other related transaction, the company shall continue to be treated as having a relationship to which this section applies even though the manufactured interest is not payable to the company.]

F10 (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

F10 (3A) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

[F11 (4) See [F12 section 736B(2) of the Taxes Act 1988 for a case] in which there is deemed to be a payment of an amount representative of interest for the purposes of this section.]

[F13 (4A) Where, for the purposes of section 736B of the Taxes Act 1988, a company is the borrower under a stock lending arrangement, then (pursuant to subsection (2A) of that section (which precludes deductions or group relief for the borrower)) no debits are to be brought into account for the purposes of this Chapter by that company in respect of the deemed representative payment under that section which is treated under [F14 subsection (2) of that section] above as if it had in fact been made.]

[F15 (4B) This section is subject to Schedule 13 to the Finance Act 2007 (sale and repurchase of securities).]

[F16 (5) This section does not apply where the manufactured interest is treated by virtue of paragraph 5(2)(c) or (4)(c) of Schedule 23A to the Taxes Act 1988 (manufactured interest passing through the market) as not being income of the person who receives it.]

Textual Amendments

F1 Words in s. 97(1) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(a)

F2 Words in s. 97(1)(a) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(b)

F3 Words in s. 97(1)(b) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(c)

F4 Words in s. 97(1) added (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(2)(d)

F5 S. 97(2) substituted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(3)

F6 Word in s. 97(2) repealed (with effect in accordance with Sch. 11 Pt. 2(8) Note of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 11 Pt. 2(8)

F7 S. 97(2)(b) repealed (with effect in accordance with Sch. 7 para. 11(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 11(2)(a), Sch. 11 Pt. 2(8)

F8 Words in s. 97(2) substituted (with effect in accordance with Sch. 7 para. 11(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 11(2)(b)

F9 S. 97(2A) inserted (with effect in accordance with Sch. 7 para. 11(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 11(3)

F10 S. 97(3)(3A) repealed (with effect in accordance with Sch. 7 para. 11(5) of the amending Act) by Finance (No. 2) Act 2005 (c. 22), Sch. 7 para. 11(4), Sch. 11 Pt. 2(8)

F11 S. 97(4) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 374(2) (with Sch. 2)

F12 Words in s. 97(4) substituted (with effect in accordance with art. 3 of the commencing S.I.) by Finance Act 2007 (c. 11), s. 47(4), Sch. 14 para. 16(2); S.I. 2007/2483, art. 3

F13 S. 97(4A) inserted (24.7.2002 with effect as mentioned in s. 82(2) of the amending Act) by Finance Act 2002 (c. 23), s. 82(1), Sch. 25 Pt. 1 para. 13(6)

F14 Words in s. 97(4A) substituted (6.4.2007) by Income Tax Act 2007 (c. 3), s. 1034(1), Sch. 1 para. 374(3) (with Sch. 2)

F15 S. 97(4B) inserted (with effect in accordance with art. 3 of the commencing S.I.) by Finance Act 2007 (c. 11), s. 47(4), Sch. 14 para. 16(3); S.I. 2007/2483, art. 3

F16 S. 97(5) repealed (19.3.1997 with effect as mentioned in Sch. 18 Pt. VI(10), Notes 3, 4, 6 of the amending Act) by 1997 c. 16, s. 113, Sch. 18 Pt. VI(10)