Repeal of late interest rules

The majority of the late interest rules described below were repealed by Finance Act 2015. Only the rules applicable to loans to close companies by participators (see CTA 2009, s 375) and loans by trustees of occupational pension schemes (see CTA 2009, s 378) survive. However, the repeal only applies for new loans entered into on or after 3 December 2014. For loans entered into before this date, the repeal has effect for interest accruing on or after 1 January 2016. It should be noted that the late interest rules still apply to interest accruing on specified connected party loans between 3 December 2014 and 31 December 2015. The legislation and repeals are set out in detail below.

Overview of rules

Generally, debits and credits arising on loan relationships are taxed and relieved as they are recognised in the accounts, ie generally on an accruals basis. However, in certain circumstances where interest on a loan relationship is not paid within 12 months of the end of the accounting period in which it accrues, no relief is given for corporation tax purposes until it has actually been paid. These provisions are known as the 'late interest' rules and can be found in CTA 2009, Part 5, Chapter 8.

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