Taxes Consolidation Act 1997 section 817B

Treatment of interest in certain circumstances

Section 817B provides that interest received early by a lender is to be taxed when it is actually received rather than when it accrues, ensuring symmetry between the timing of the lender's tax charge and the borrower's tax relief.

• Where a lender receives interest in a chargeable period earlier than the period in which it would otherwise be brought into account, the interest is taxed in the earlier period of receipt.
• The interest is not taken into account again in the later chargeable period or periods in which it would otherwise have accrued.
• A chargeable period means an accounting period for corporation tax purposes or a year of assessment (and its basis period) for income tax purposes.
• Special rules apply where basis periods overlap or where there is a gap between basis periods, to ensure interest is allocated to the correct period.