Taxes Consolidation Act 1997 section 817C

Restriction on deductibility of certain interest

Section 817C restricts the deductibility of interest payable to a connected person where there is a mismatch between the timing or treatment of the interest deduction claimed by the payer and the interest brought into charge as income of the recipient.

• Where interest is payable to a connected person and is deductible as a trading expense of the payer but is not treated as trading income of the recipient, the payer's deduction is restricted so that cumulative deductions cannot exceed cumulative amounts chargeable to tax on the recipient.
• The section does not apply where the recipient of the interest is a non-resident company that is not under the ultimate control, whether directly or indirectly, of persons resident in the State.
• Any interest deduction denied under the restriction is carried forward to the following chargeable period and treated as payable in the basis period for that period, so the deduction is deferred rather than permanently lost.
• An anti-avoidance rule extends the restriction to cases where arrangements route interest through an unconnected intermediary to circumvent the connected person requirement.