SCHEDULES
SCHEDULE 22Avoidance involving financial arrangements
Restrictions on relief for interest payments
21
1
Section 384 of ITA 2007 (general restrictions on relief for interest payments) is amended as follows.
2
In subsection (2), for “interest is paid at a rate in excess of a reasonable commercial rate” substitute “
the interest paid on a loan in a tax year exceeds a reasonable commercial amount of interest on the loan for the relevant period
”
.
3
After subsection (2) insert—
3
The relevant period is the tax year or, if the loan exists for part only of the tax year, the part of the tax year for which the loan exists.
4
A reasonable commercial amount of interest on the loan for the relevant period is an amount which, together with any interest paid before that period (other than unrelieved interest), represents a reasonable commercial rate of interest on the loan from the date it was made to the end of that period.
5
“Unrelieved interest” means interest which because of subsection (2) is not eligible for relief under this Chapter.
4
The amendments made by this paragraph have effect in relation to interest paid on or after 9 October 2007; but in relation to interest paid in the period beginning with that date and ending with 5 April 2008, they have effect as if the references in section 384(2) and (3) to a tax year were to that period.