Income and Corporation Taxes Act 1988

5 (1) For any year of assessment (“the relevant year”) the alternative method of calculation set out in this paragraph applies if—

(a) the inspector so requires, by notice given to the employee, for the purpose of any assessment to income tax (or the adjustment of any such assessment in consequence of an appeal); or

(b) the employee so elects, by notice given to the inspector within the time allowed by sub-paragraph (2) below.

(2) An election by the employee must be made—

(a) in a case where an assessment including the emoluments in question has been made on the basis of the normal method of calculation, within the time allowed for appealing against that assessment or such further time as the inspector may allow;

(b) where no such assessment has been made, within six years after the end of the relevant year of assessment.

(3) The alternative method of calculating the amount of interest at the official rate payable on a loan for the relevant year is as follows—

(a) take each period in the relevant year during which the official rate of interest remains the same;

(b) for each such period take for each day in the period the maximum amount outstanding of the loan on that day, and add those amounts together;

(c) multiply that sum by the official rate in force during the period divided by 365; and

(d) add together the resulting figures for each period in the relevant year.