Taxes Consolidation Act 1997 Schedule 32, paragraph 8

Interest on certain loans: relief from corporation tax

Schedule 32 paragraph 8 provides relief from corporation tax for lending companies receiving interest on permanent loans entered into before 27 November 1975.

• A "permanent loan" is a loan of permanent character under a pre-27 November 1975 agreement, secured on the borrowing company's assets or income and, if repayable, subject to at least three months' notice — but only where the interest rate and other loan conditions are fixed for the duration of the loan.
• Where a lending company's income for an accounting period includes interest on a permanent loan, it may claim a reduction in its corporation tax liability for that period.
• The reduction is calculated so that the effective corporation tax on the permanent loan interest is limited to an amount equivalent to income tax at the standard rate, preserving the lending company's pre-corporation-tax position.
• Any excess interest that cannot be relieved in the current accounting period is carried forward and aggregated with permanent loan interest of the next period, and claims must be made to the inspector within two years of the end of the accounting period.

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