Income tax

Schedule 13 of the Finance Act 1996 did not define “interest”, nevertheless, it was possible to identify certain characteristics of an amount payable by way of interest. First, it was calculated by reference to an underlying debt. Second, it was a payment made according to time, by way of compensation for the use of money. Third, the sum payable accrued from day to day or at other periodic intervals. Fourth, whilst the payment so accrued, it did not, in order for it to be interest, have to be paid at any intervals: it was possible for interest not to become payable until the principal became payable. Fifth, what the payment was called was not determinative; the question had always to be one as to its true nature. Sixth, the fact that an interest payment might be aggregated with a payment of a different nature did not “denature” the interest payment.