Corporation Tax Act 2009

405 Certain non-UK residents with interest on 3½% War Loan 1952 Or After

(1) This section applies if—

(a) in any accounting period a non-UK resident company carries on a business in the United Kingdom—

(i) consisting of banking or insurance, or

(ii) consisting wholly or partly of dealing in securities, and

(b) in calculating the profits of the business for the period any amount is disregarded as a result of section 1279 (exemption of profits from FOTRA securities) because of a condition subject to which any 3½% War Loan 1952 Or After was issued.

(2) Interest on money borrowed for the purposes of the business is to be brought into account as a debit for the purposes of this Part for that period only so far as it exceeds the ineligible amount.

(3) The ineligible amount is found as follows—

• Step 1

  Add together all sums borrowed for the purposes of the business and still owing in the accounting period.

• Step 2

  Deduct any sums carrying interest that is not brought into account as a debit under this Part (otherwise than because of subsection (2)).

• Step 3

  If the amount found at Step 2 exceeds the total cost of the 3½% War Loan 1952 Or After held for the purposes of the business in the accounting period, deduct the excess from that amount.

• Step 4

  Calculate the average rate of interest in the accounting period on money borrowed for the purposes of the business.

• Step 5

  Calculate the amount of interest payable on the amount found at Step 3 at the rate found at Step 4 for the accounting period.

  The result is the ineligible amount.

(4) If the company’s holding of 3½% War Loan 1952 Or After has fluctuated during the accounting period, the total cost for the purposes of Step 3 is taken to be—

where—

• C is the cost of acquisition of the initial holding (if any) and any holdings acquired during the accounting period,

• AH is the average holding in that period, and

• TH is the total of the initial holding (if any) and any holdings acquired during the accounting period.

(5) In subsection (4) “initial holding” means the holding held by the company at the beginning of the accounting period.