Commentary

D1.739 Taxation treatment of loan relationship debits and credits

Corporate tax
Corporate tax | Commentary

D1.739 Taxation treatment of loan relationship debits and credits

Corporate tax | Commentary

Taxation treatment of loan relationship debits and credits

D1.739 Taxation treatment of loan relationship debits and credits

A loan relationship may be held or owed by a company for the purposes of a trade which it carries on or a company may have no trade or has the relationship for an investment or non-trade purpose. The credits and debits of trading loan relationships are treated differently to those of non-trading loan relationships (see below). In addition, the rules relating to non-trading loan relationships changed with effect for accounting periods beginning on or after 1 April 2017. For details of the position before 1 April 2017, see D1.740. Note that the pre-1 April 2017 rules continue to apply to charities after 1 April 2017. Details of relief for overseas tax is also discussed below.

For details of the taxation treatment of non-lending relationships see D1.743.

Trading debits/credits

Where a loan relationship is held or owed by a company for the purposes of a trade which it carries on, debits and credits arising in connection with that loan relationship are treated as expenses and receipts of the trade1. Such expenses qualifying as debits under the rules described in D1.715 are allowed notwithstanding that they may not qualify under general corporation tax rules (eg because they are of a capital nature)2.

Where the company is a party to a creditor relationship, it is only a trading relationship of the company if it is a party 'in the course of activities forming an integral part of

To continue reading
View the latest version of this document, as well as thousands of others like it, sign in to TolleyLibrary or register for a free trial