Finance (No. 2) Act 2005

Meaning of “commercial rate of interest”

13 (1) In section 103 of FA 1996 (interpretation) after subsection (3) insert—

“(3A) For the purposes of this Chapter, a commercial rate of interest, in the case of a company and any asset, is—

(a) a rate (“the simple commercial rate”) that is reasonably comparable to the rate that the company could obtain by placing on deposit the money it invested in the asset, or

(b) in any case where—

(i) the likely rate of increase in the value of the asset is in question, and

(ii) that likely rate is a lower rate than the simple commercial rate, and

(iii) the difference is a result of an expectation that the company would also obtain a tax advantage as a result of investing in the asset,

that lower rate.

(3B) In subsection (3A) above, “tax advantage” has the meaning given by section 709(1) of the Taxes Act 1988.”.

(2) The amendment made by this paragraph has effect in relation to assets held on or after 16th March 2005 (whenever acquired).