Income Tax (Trading and Other Income) Act 2005 section 381B

Income charged

Section 381B establishes the basis on which disguised interest is charged to income tax, specifying that the full gross amount of the return arising in the tax year is taxable.

• Tax is charged on the full amount of the return arising in the tax year, with no deductions permitted from the gross amount
• The charge applies equally to any part of the return that arises in the tax year, not just the full expected return
• The concept of income "arising" follows established case law, meaning it is taxable when it has effectively benefited the taxpayer
• Where an arrangement does not proceed as originally planned and only a partial return materialises, only the disguised interest actually produced at that point is taxable