Corporation Tax Act 2009 section 374

Connection between debtor and person standing in position of creditor

Section 374 sets out the first circumstance in which the late interest rules under section 373 apply, specifically where the debtor company and the creditor company are connected with each other.

• This section addresses one of the specific situations triggering the late interest provisions of section 373.
• The rule applies where the company owing the debt (the debtor) and the company in the position of creditor are connected companies as defined in section 466 of the same Act.
• Where companies are connected, any late-paid interest between them may be subject to special tax treatment to prevent manipulation of the timing of tax deductions.
• This provision ensures that interest payments between connected companies are only relievable when they are actually paid, rather than when they accrue.