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Amendment of section 840A of Principal Act (interest on loans to defray money applied for certain purposes)
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36. Section 840A of the Principal Act is amended—
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(a) in subsection (1), by the insertion of the following definition:
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“ ‘loan’ includes a promissory note and any other agreement or arrangement having a similar effect;”,
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and
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(b) by the substitution of the following subsection for subsection (2):
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“(2) Subject to subsections (3), (6), (7) and (8), in computing the amount of the profits or gains to be charged to corporation tax under Schedule D, no sum shall be deducted in respect of—
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(a) any interest payable on a loan to a company (in this section referred to as the ‘investing company’) used in acquiring assets from a company which, at the time of the acquiring of the assets, was connected with the investing company, where the loan is made to the investing company by a person who is connected with the investing company, or
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(b) any interest payable on any form of refinancing of a loan referred to in paragraph (a).”.
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