Corporation Tax Act 2009 Explanatory Notes

Chapter 9: Manufactured interest etc

1441.This Chapter treats “manufactured interest” (payments representing interest under a stock-lending arrangement) as interest under a loan relationship.

Section 539: Introduction to Chapter

1442.This section explains when a company has a “manufactured interest relationship”. It is based on section 97(1) and (4) of FA 1996.

Section 540: Manufactured interest treated as interest under loan relationship

1443.This section provides the main rule that the manufactured interest is treated as if it were interest under a loan relationship and the manufactured interest relationship is treated as if it were a loan relationship. It is based on section 97(2), (2A) and (4B) of FA 1996. It also ensures that debits and credits in respect of related transactions can still be taken into account after the company no longer has the right to receive manufactured interest (to prevent the sale of rights to receive such interest to third parties).

Section 541: Debits for deemed interest under stock lending arrangements disallowed

1444.This section disallows a debit under the loan relationship provisions for representative payments under section 736B(2) of ICTA. It is based on section 97(4A) of FA 1996.

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