Taxes Consolidation Act 1997 section 845A

Non-application of section 130 in the case of certain interest paid by banks

Section 845A allows a bank to elect that interest paid to a foreign parent or associated company is not treated as a distribution, thereby preserving the bank's entitlement to a tax deduction for that interest.

• Interest paid by a bank to a non-resident parent or associated company may be treated as a distribution under section 130(2)(d)(iv), denying the bank a tax deduction for the payment.
• Where the interest would otherwise be a deductible trading expense and represents no more than a reasonable commercial return for the use of the principal, the bank may elect to disapply the distribution treatment.
• The effect of the election is that the interest is not treated as a distribution and remains tax-deductible to the bank.
• The election must be made in writing to the inspector and included with the bank's return of profits for the accounting period in which the interest is paid.