Income and Corporation Taxes Act 1988

Valid from 01/05/1995

Part IV U.K. Excess overdue interest

Introductory U.K.

9 (1) The provisions referred to in sections 768B(11) and 768C(10) for determining whether a payment of interest made by the company or, as the case may be, the relevant company represents excess overdue interest, and if so to what extent, are set out in paragraphs 10 to 12 below.

(2) In those paragraphs—

(a) “overdue interest” means interest due to be paid by the company or, as the case may be, the relevant company before the change in the ownership and still unpaid at the end of the actual accounting period in which the change occurs;

(b) “amount C” means the amount of all the overdue interest; and

(c) “amount P” means the amount of the profits for the accounting period ending with the change in the ownership.

(3) For the purposes of sub-paragraph (2) above—

(a) interest shall be assumed to become due on a day to day basis as it arises;

(b) the reference to the profits is a reference to the profits after making all deductions and giving all reliefs that for the purposes of corporation tax are made or given against the profits, including deductions and reliefs which under any provision are treated as reducing them for those purposes.

The rules U.K.

10 (1) A payment of interest does not represent excess overdue interest except to the extent that it discharges a liability to pay overdue interest.

(2) For the purposes of this Part of this Schedule, a payment of interest on a debt shall be treated as discharging any liability to pay overdue interest before it is treated to any extent as discharging a liability to pay interest which is not overdue interest.

11 Where amount C does not exceed amount P, no payment of interest represents excess overdue interest.

12 (1) Where amount C exceeds amount P—

(a) find the amount by which amount C exceeds amount P (amount X);

(b) take all the payments and parts of payments which discharge any liability to pay overdue interest;

(c) treat those payments and parts of payments as cancelling out amount X before any other part of amount C.

(2) A payment of interest represents excess overdue interest to the extent that, in accordance with sub-paragraph (1) above, it is treated as cancelling out amount X.