Finance Act, 1986

Chapter VII

Corporation Tax

Amendment of section 84A (limitation on meaning of “distribution”) of Corporation Tax Act, 1976.

54.—Section 84A (inserted by the Finance Act, 1984 ) of the Corporation Tax Act, 1976 , is hereby amended by the insertion after subsection (9) of the following subsection:

“(10) (a) This subsection applies to any interest or other distribution which, apart from this subsection, would be a distribution for the purposes of this Act, other than any interest or other distribution which is paid by the borrower under an obligation entered into—

(i) before the 13th day of May, 1986, or

(ii) before the 1st day of September, 1986, pursuant to negotiations which were in progress between the borrower and a lender before the 13th day of May, 1986.

(b) Subsection (2) shall have effect as respects any interest or other distribution to which this subsection applies as if paragraph (c) of subsection (3) were omitted.

(c) For the purposes of paragraph (a)—

(i) an obligation shall be treated as having been entered into before a particular date if, but only if, before that date there was in existence a binding contract in writing under which that obligation arose, and

(ii) negotiations pursuant to which an obligation was entered into shall not be regarded as having been in progress before the 13th day of May, 1986, unless, on or before that date, preliminary commitments or agreements in relation to that obligation had been entered into between the lender referred to in that paragraph and the borrower.”.