383. Manufactured interest.

Where:

  1.  

    (1)     an amount ('manufactured interest') is payable by or on behalf of, or to, any company under any arrangement relating to the transfer of an asset representing a loan relationship1; and

  2.  

    (2)     that amount is, or (when paid) will fall to be treated as, representative of interest under that relationship ('the real interest')2, the company has a manufactured interest relationship for the purposes of Corporation Tax Acts3.

For these purposes4, any manufactured interest under the manufactured interest relationship payable:

  1.  

    (a)     by the company must be treated as it would be if the manufactured interest were interest payable on a