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HMRC internal manual

Capital Gains Manual

Introduction and computation: computation: IT: disguised interest

TCGA92/S37(2A) and TCGA92/S39(3A)

Finance Act 2013 introduced income tax legislation on disguised interest, see SAIM2710+.  The legislation is widely drawn and charges income tax on the return produced from arrangements that give rise to an amount that is economically equivalent to interest without constituting interest in legal form.

It is possible that the arrangements may involve a disposal or disposals on which a chargeable gain may accrue.  TCGA92/S37(2A) and TCGA92/S39(3A) make clear that capital gains computations are unaffected by amounts  which are, or are taken into account in computing, disguised interest.

Where income tax is charged on a disguised interest return, ITTOIA05/S381D, see SAIM2790, protects against double taxation and permits a just and reasonable adjustment of any other tax, including capital gains tax, charged in relation to that disguised interest.