Interest on loan between connected companies

Can interest accrued in connection with a loan between connected companies be tax deductible? A loan was taken out and repaid with interest. The interest was predetermined in the loan agreement. ​​​​​​​As they are connected companies, can't interest be tax deductible for the borrower?

Hi,
The general rule is that interest paid is tax deductible and interest received is taxable by reference to when it is accrued, rather when it is paid or received.
Special rules, however, apply where there is a delay in paying the interest.
You can find HMRC guidance on this topic at:
CFM35800
Thankyou.

Hi, thank you for your reply. Does this rule also apply to connected companies?

Hi,

The general rule applies to connected companies unless the special rules apply.  

Thank you.

Thank you for your response. I wanted to clarify one more point. In your response to my question, there is a link to an HMRC guide outlining the topic of late interest between connected companies. In the case I am asking about, there is no late interest, only interest agreed in advance on the amount of the loan granted (interest was predetermined in the loan agreement). Do the same rules apply in this case as for late interest?

As previously advised, the general rule is interest paid is tax deductible and interest received is taxable by reference to when it is accrued, rather when it is paid or received.
Special rules apply where there is a delay in paying the interest.
You can find HMRC guidance on this topic at CFM35800 - Loan relationships: connected parties: late interest: Contents - HMRC internal manual