INTM578020 - Thin capitalisation: interest cover

What is interest?

In a thin capitalisation case there is rarely any dispute about what constitutes interest, and this is not the place to discuss it. See INTM505020 for further details. See also INTM585350 for the way that pension scheme interest costs are treated.

Unless there is a particular reason not to do so, the interest payable and interest receivable as shown in the accounts can be accepted. However, HM Revenue & Customs does not accept that these two can be set against each other to provide a net figure for interest payable for the purpose of calculating interest cover – see INTM578110.