Paragraph 5: Credits and debits for manufactured interest
55.Paragraph 5 inserts additional wording into the rules dealing with manufactured interest payments made by companies to clarify that the payer or recipient of such amounts is generally to be taxed on them only to the extent that they are recognised in accordance with GAAP.
56.Sub-paragraph (1) inserts at the end of section 540(3) of CTA (manufactured interest treated as interest under a loan relationship for accounting periods ending on or after 1 April 2009) wording that ensures that the credits and debits to be brought into account by a payer or recipient of manufactured interest are those that are recognised under GAAP. This is subject to any other provision in the rules in Part 5 (loan relationships) or the manufactured payment unallowable purpose rule in paragraph 7A of Schedule 23A to ICTA overriding GAAP.
57.Sub-paragraph (2) inserts equivalent wording into section 97(2) of FA 1996, which is the pre-CTA version of section 540(3) of CTA for periods ending before 1 April 2009.
58.Sub-paragraph (3) contains the commencement rule, which is that it is generally to apply in relation to manufactured interest whenever paid. However, the inserted wording will not apply to manufactured interest which is treated by section 737A(5) of ICTA as paid before 27 January 2009.
