Corporation Tax Act 2009 section 372

Introduction to Chapter

Section 372 introduces the chapter dealing with the restriction of tax debits for interest on loans between connected parties where interest is unpaid or paid late.

• This chapter restricts the debits a company can recognise for corporation tax purposes where interest on a loan relationship is not paid or is paid late, and there is a connection between the borrower and the lender.
• The main rule (in section 373) treats late or unpaid interest as not accruing for tax purposes until it is actually paid.
• The types of connection that trigger this rule include loans made to close companies by their participators (shareholders and others with a stake in the company), and loans made by trustees of occupational pension schemes.
• The chapter also defines what it means to "stand in the position of a creditor", which includes persons who are indirectly in that position rather than being the direct lender.