Manufactured interest on UK securitiesU.K.
578Manufactured interest on UK securitiesU.K.
(1)This section applies if a person—
(a)pays another person an amount (“manufactured interest”) which is representative of a periodical payment of interest on UK securities, and
(b)does so under a requirement of an arrangement between them for the transfer of the securities.
(2)The Income Tax Acts apply in relation to the recipient, and persons claiming title through or under the recipient, as if—
(a)the manufactured interest were a periodical payment of interest on the securities, and
(b)the gross amount of the deemed interest payment were equal to the gross amount of the interest of which the manufactured interest is representative.
(3)If the payer is UK resident, or a person acting in the course of a trade carried on in the United Kingdom through a branch or agency, the Income Tax Acts apply in relation to the payer subject to [F1section 579] (allowable deductions).
(4)See also—
section 919 (manufactured interest payments by UK residents etc: deduction of income tax at source), and
section 920 (foreign payers of manufactured interest: the reverse charge).
(5)This section is subject to—
section 583 (manufactured payments exceeding underlying payments),
section 584 (manufactured payments less than underlying payments), and
section 585 (power to deal with other special cases).
Textual Amendments
F1Words in s. 578(3) substituted (21.7.2008 with effect in accordance with s. 63(2) of the amending Act) by Finance Act 2008 (c. 9), Sch. 23 para. 6
579Allowable deductionsF2...U.K.
(1)This section applies to a person who pays manufactured interest as mentioned in section 578(1).
(2)The gross amount of the manufactured interest is allowable for income tax purposes as a deduction in calculating the net income of the payer (see Step 2 of the calculation in section 23).
This is subject to subsection (3).
[F3(3)It is—
(a)deductible by virtue of subsection (2) only so far as it is not otherwise deductible, and
(b)not deductible (whether by virtue of subsection (2) or otherwise) if it (or any part of it) is made directly or indirectly in consequence of, or otherwise in connection with, avoidance arrangements.]
(9)For the purposes of subsection (3)(a) an amount is [F4otherwise deductible if, apart from this section,] it is—
(a)deductible in calculating any of the payer's profits or gains for income tax purposes, or
(b)deductible for those purposes in calculating the net income of the payer.
F5(10). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F2Word in s. 579 heading omitted (21.7.2008 with effect in accordance with s. 63(2) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 23 para. 7(5)
F3S. 579(3) substituted (21.7.2008 with effect in accordance with s. 63(2) of the amending Act) for s. 579(3)-(8) by Finance Act 2008 (c. 9), Sch. 23 para. 7(2)
F4Words in s. 579(9) substituted (21.7.2008 with effect in accordance with s. 63(2) of the amending Act) by Finance Act 2008 (c. 9), Sch. 23 para. 7(3)
F5S. 579(10) omitted (21.7.2008 with effect in accordance with s. 63(2) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 23 para. 7(4)
F6580Allowable deductions: restriction on double countingU.K.
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Textual Amendments
F6S. 580 omitted (21.7.2008 with effect in accordance with s. 63(2) of the amending Act) by virtue of Finance Act 2008 (c. 9), Sch. 23 para. 8