Taxes Consolidation Act, 1997 (Number 39 of 1997)
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817C Restriction on deductibility of certain interest.
(1) In this section—
“chargeable period” and “basis period” have the same meanings as they have for the purposes of section 817B;
“relevant date”, in relation to a chargeable period, means the date on which the basis period for the chargeable period ends;
“relevant liability” means a liability of one person to another person.
(2) [2]>This section applies where<[2][2]>Subject to subsection (2A), this section applies where<[2]—
(a) interest is payable by a person, directly or indirectly, to a connected person (being interest which, if it were paid, would be chargeable to tax under Schedule D),
(b) the interest would, apart from this section, be allowable in computing trading income of a trade carried on by the person, and
(c) (i) in a case where the connected person is chargeable to tax in respect of the interest, the interest does not fall to be taken into account, or
(ii) in any other case, if the connected person were resident in the State the interest would not fall to be taken into account,
in computing the trading income of a trade carried on by the connected person.
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(2A) (a) This section does not apply where the connected person referred to in subsection (2) is a company which—
(i) is not resident in the State, and
(ii) is not under the control, whether directly or indirectly, of a person who is, or persons who are, resident in the State.
(b) For the purposes of this subsection—
(i) “control” shall be construed in accordance with subsections (2) to (6) of section 432 as if in subsection (6) of that section for “5 or fewer participators” there were substituted “persons resident in the State”, and
(ii) a company shall not be treated as under the control whether directly or indirectly, of a person or persons if that person is or those persons are, in turn under the control of another person or other persons.
<[3]
(3) Where this section applies, so much of any interest payable, or treated under subsection (4) as payable, by a person, directly or indirectly, to a connected person in respect of a relevant liability shall not be allowable in computing trading income chargeable on the person for a chargeable period (in this subsection referred to as the “first-mentioned chargeable period”) as is greater than the excess of A over B where—
A is the aggregate of amounts of interest on the relevant liability which are chargeable to tax as income of the connected person, or would be so chargeable but for the provisions of section 198 or of arrangements having the force of law by virtue of [4]>section 826<[4][5]>[4]>826(1)(a),<[4]<[5][5]>826(1),<[5] for all chargeable periods the basis periods for which end on or before the relevant date in relation to the first-mentioned chargeable period, and
B is the aggregate of the amounts of interest on the relevant liability which have been allowed as deductions in computing trading income for the purposes of tax for, or have otherwise been allowed or relieved for the purposes of tax in, chargeable periods the basis periods for which end before the relevant date in relation to the first-mentioned chargeable period.
(4) Interest which, by virtue of subsection (3), is not allowable in computing trading income for a chargeable period shall be treated as being payable in the basis period for the following chargeable period.
(5) Where under arrangements made by any person (in this subsection referred to as the “first person”)—
(a) interest is payable by the first person to another person such that this section does not apply by virtue only of the fact that the persons concerned are not connected, and
(b) interest is payable by some other person to a person (in this subsection referred to as the “second person”) connected with the first person such that this section does not apply by virtue only of the fact that the other person and the second person are not connected,
then, subsections (3) and (4) shall apply as if the interest had been payable by the first person to the second person.
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[1]
Inserted by FA03 s44(1). This section applies as respects any chargeable period ending on or after 6 February 2003.
[2]
Substituted by FA04 s32(1)(a). This section is deemed to have applied as respects any chargeable period ending on or after 6 February 2003.
[3]
Inserted by FA04 s32(1)(b). This section is deemed to have applied as respects any chargeable period ending on or after 6 February 2003.
[4]
Substituted by FA04 sched3(1)(u). This section shall have effect as on and from 25 March 2004