Corporation Tax Act 2009 section 373

Late interest treated as not accruing until paid in some cases

Section 373 explains when a company that owes interest on a loan must delay its tax deduction until the interest is actually paid, rather than claiming the deduction when the interest accrues.

• Where interest on a company's borrowing is paid late (more than 12 months after the end of the accounting period in which it accrues), the tax deduction is deferred until payment
• This deferral applies only if the lender has not brought the full amount of the interest into account as taxable income for any accounting period
• Both conditions — late payment and the lender not recognising the income — must be met, and the situation must also fall within one of the specific categories in sections 375 or 378 (broadly, loans from participators to close companies or loans from occupational pension scheme trustees)
• The accounting period in which the interest would normally have accrued (before this rule applies) is referred to as "the actual accrual period"