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Finance Act, 1988

Application of section 84 (matters to be treated as distributions) of Corporation Tax Act, 1976, to certain interest.

37.—(1) (a) This section applies to so much of any interest as—

(i) is a distribution by virtue only of section 84 (2) (d) (iv) of the Corporation Tax Act, 1976 ,

(ii) is payable by a qualified company in the course of carrying on relevant trading operations and would, but for the said section 84 (2) (d) (iv), be deductible as a trading expense in computing the amount of the company's income from the relevant trading operations, and

(iii) is interest payable to a company which is a resident of the United States of America or of a territory with the government of which arrangements having the force of law by virtue of section 361 of the Income Tax Act, 1967 , have been made.

(b) In paragraph (a)—

“qualified company” and “relevant trading operations” have the same meaning as they have for the purposes of section 39B (inserted by the Finance Act, 1987 ) of the Finance Act, 1980 ;

“resident of the United States of America” has the meaning assigned to it by the Convention set out in Schedule 8 to the Income Tax Act, 1967 .

(c) For the purposes of paragraph (a), a company shall be regarded as being a resident of a territory other than the United States of America if it is so regarded under arrangements made with the government of that territory and having the force of law by virtue of section 361 of the Income Tax Act, 1967 .

(2) Where a company proves that this section applies to any interest payable by it for an accounting period and elects to have that interest treated as not being a distribution for the purposes of section 84 (2) (d) (iv) of the Corporation Tax Act, 1976 , the said section 84 (2) (d) (iv) shall not apply to that interest.

(3) An election under this section in relation to interest payable by a company for an accounting period shall be made in writing to the inspector and submitted together with the company's return of its profits for the period.