Tension accepted

Abbey National Treasury Services and entered into a sale and option deed (the repo) on 9 March 200 under which the company sold to Santander its offshore parent company the right to receive interest under floating rate notes comprising interest.

It was agreed that the notes were loan relationships of Abbey National.

The issue in dispute was whether the amounts credited to Abbey National’s income statement for the 2007 accounting period relating to the interest coupons should be treated as a taxable credit under the loan relationship rules in FA 1996 s 84(1) s 85A and sch 9.

Abbey National said no corporation tax was due on the quarterly interest it accrued on the floating rate notes because the...