This section disallows deductions in computing Schedule D profits or gains for interest on loans used by an investing company to acquire assets from a company connected with the investing company, and for interest on refinancing such loans. Definitions provided include: 'asset' (excluding items treated as machinery or plant under section 291A(2) and trading stock), 'loan' (including promissory notes), and 'trading stock' as defined in section 89.

Exceptions permit deduction to the extent interest does not exceed taxable profits of an acquired trade or of a trade attributable to an acquired asset, with necessary apportionments and treatment of parts of trades as separate. The restriction does not apply where interest is payable to a company whose sole business (other than holding shares) is on‑lending of funds borrowed from unconnected persons, to qualifying financing companies (section 76E), or to qualifying companies (section 110). Additional provision in subsection (7A) exempts interest where the connected lender is taxed in the State or a relevant territory and prior seller borrowings gave rise to tax relief, subject to principal limits and apportionment. Subsection (9) treats loans from unconnected lenders as connected where a connected person has provided funds to the unconnected lender as part of the arrangement.