Commentary

D1.744 Loan relationships—Interest paid late

Corporate tax
Corporate tax | Commentary

D1.744 Loan relationships—Interest paid late

Corporate tax | Commentary

D1.744 Loan relationships—Interest paid late

In certain cases where interest is not paid within 12 months of the end of the accounting period in which it accrues, it is not treated as a debit for that accounting period but for the accounting period in which it is paid. This is the case if1:

  1.  

    •     credits representing the full amount of the interest are not brought into account in respect of the corresponding creditor relationship for any accounting period and

  2.  

    •     either:

    1.  

      –     for debtor loan relationships entered into before 3 December 2014 in respect of interest that accrues before 1 January 20162 there is a connection between the debtor company and the creditor

    2.  

      –     the close company requirements are met

    3.  

      –     for debtor loan relationships entered into before 3 December 2014 in respect of interest that accrues before 1 January 20163 the creditor is a company and one of the parties has a major interest (see below) in the other or

    4.  

      –     the creditor is a retirement benefit scheme (and certain conditions are satisfied)

References to a creditor include a person (who need not be a company) who indirectly stands in that position through a series of loan relationships or money debts which would be loan relationships if the intermediary was a company4.

Connection

For interest that accrued before 1 January 2016 (or earlier, in certain cases), there is a connection between the debtor and the creditor if, at any time in the relevant accounting period:

  1.  

    •     there is a connection between

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