Corporation Tax Act 2009 section 405

Certain non-UK residents with interest on 3½% War Loan 1952 Or After

Section 405 restricts the amount of borrowing cost that a non-UK resident company can deduct as a loan relationship debit where it holds 3½% War Loan 1952 Or After securities for use in a UK banking, insurance or securities dealing business.

• Applies to non-UK resident companies carrying on banking, insurance or securities dealing in the UK that hold 3½% War Loan 1952 Or After securities whose income is exempt under FOTRA rules
• Interest on money borrowed for the business can only be deducted to the extent it exceeds an "ineligible amount" calculated using a five-step formula
• The five-step calculation identifies the proportion of borrowing costs attributable to funding the tax-exempt War Loan holding and disallows that proportion
• Where the company's War Loan holding has fluctuated during the period, the total cost is adjusted using a formula based on the ratio of the average holding to the total of all holdings acquired