Section 579: Allowable deductions: matching
1728.This section details the special rules on deductibility of manufactured interest for the payer which are referred to in section 578. It is based on paragraph 3(2), (2A) and (10) of Schedule 23A to ICTA.
1729.The effect of the closing words of subsection (2) and subsection (3)(a) is that the general rules on income tax relief take priority. To the extent that the manufactured interest is deductible as a trading expense, for example, it is not deductible under this section.
1730.Subsection (3)(b) restricts the extent to which a deduction is allowable under subsection (2). The amount mentioned in subsection (2) is allowable to the extent that it is matched with an interest-type receipt, with a taxable amount under Chapter 2 of Part 12 (accrued income profits), or with deemed interest under a repo under subsection (4), (6) or (7) respectively.
1731.Paragraph 3(2) of Schedule 23A to ICTA, so far as relevant, provides that “the manufactured interest shall be treated, except in determining whether it is deductible, as if it were an annual payment”. As explained in the commentary on section 919, this Act does not continue the annual payment pretence and the italicised words have therefore not been rewritten.
1732.Subsections (6) and (10) include by implication a minor change in the law on accrued income profits; see Change 101 in Annex 1.
