Taxes Consolidation Act 1997 section 255

Arrangements for payment of interest less tax or of fixed net amount

Section 255 sets out how older loan agreements that refer to interest being paid "less tax" or at a net rate are to be interpreted, given that tax is no longer deducted at source from such interest payments.

• Before 6 August 1974, it was common practice for loan agreements to provide for interest to be paid "less tax" or at a net rate after deducting tax at the standard rate.
• Since 6 August 1974, tax is no longer deducted at source from interest on bank loans paid within the State, so interest is now paid in full at the gross amount.
• Where an old agreement states that interest is payable "less tax" or uses equivalent wording, those words are simply disregarded — the borrower must pay the full gross amount of interest to the lender.
• Where an agreement specifies a net rate of interest (i.e. the rate remaining after deducting tax at the standard rate), the agreement is treated as requiring payment at the corresponding gross rate of interest.