Section 377 | Disallowance of deductions: identification of the tax-interest amounts to be left out of account ^F1

(1)This section applies where—^F1

(a)a company is required to leave tax-interest expense amounts out of account in an accounting period under section 375 or 376, and^F1

(b)the total of the tax-interest expense amounts that, apart from that provision, would be brought into account in the accounting period exceeds the total of the tax-interest expense amounts that are required by that provision to be left out of account in that period.^F1

(2)Tax-interest expense amounts must (subject to the following provisions of this section) be left out of account in the following order.^F1

First, leave out of account tax-interest expense amounts that meet condition A in section 382 and would (if brought into account) be brought into account under Part 5 of CTA 2009 (non-trading debits in respect of loan relationships).

Second, leave out of account tax-interest expense amounts that meet condition B in section 382 and would (if brought into account) be brought into account under Part 5 of CTA 2009 as a result of section 574 of that Act (non-trading debits in respect of derivative contracts).

Third, leave out of account tax-interest expense amounts that meet condition A in section 382 and would (if brought into account) be brought into account under Part 3 of CTA 2009 as a result of section 297 of that Act (debits in respect of loan relationships treated as expenses of trade).

Fourth, leave out of account tax-interest expense amounts that meet condition B in section 382 and would (if brought into account) be brought into account under Part 3 of CTA 2009 as a result of section 573 of that Act (debits in respect of derivative contracts treated as expenses of trade).

Fifth, leave out of account tax-interest expense amounts that meet condition C in section 382 and do not also meet condition A or B in that section (finance leases, debt factoring and service concession arrangements).

(3)The company may—^F1

(a)elect that subsection (2) is not to apply to the accounting period, or^F1

(b)revoke an election previously made.^F1

(4)An election under this section must specify the particular tax-interest expense amounts that are to be left out of account.^F1