Taxes Consolidation Act 1997 section 553

Interest charged to capital

Section 553 allows a company to include capitalised interest on borrowed money used to construct a building, structure or works as a deductible cost when computing a chargeable gain on disposal.

• Where a company borrows to fund the construction of a building, structure or works, and the resulting expenditure qualifies as a deduction under section 552 in computing a gain on disposal, any interest on the borrowing that relates to the period up to the date of disposal may also be deductible.
• The interest must have been charged to capital by the company — that is, treated as part of the capital cost of the asset rather than expensed through profit or loss.
• Only interest referable to a period ending on or before the disposal qualifies; interest accruing after disposal is excluded.
• The effect is to override the general rule in section 552(3)(b) which would otherwise prevent such interest from being included in the allowable expenditure.