Section 976 | Arrangements for payments of interest less tax or at specified net rate

(1)This section applies if—

(a)provision is made for the payment of interest, and

(b)the interest is payable without deduction of a sum representing income tax.

(2)It applies—

(a)whenever the provision was made, and

(b)whether it was made orally or in writing.

(3)If the provision is for the payment of interest “less tax” (or uses words to similar effect) it is to be read as if the words “less tax” (or the equivalent words) were not included.

(4)Subsection (5) applies if the provision is (however worded)—

(a)for the payment of interest to which subsection (6) applies, and

(b)for that interest to be paid at such a rate (“the gross rate”) that the amount of interest payable at that rate is, after deduction of a sum representing income tax, equal to the amount of interest payable at a specified rate (“the net rate”).

(5)In that case the provision is to be read as if it were for the payment of interest at the gross rate.

(6)This subsection applies to—

(a)interest on which the recipient is chargeable to income tax, which falls within Chapter 2 of Part 4 of ITTOIA 2005 but which is not relevant foreign income, or

(b)interest which is required to be brought into account under Part 5 of CTA 2009 (loan relationships) as a non-trading credit of the recipient.