CFM30170 - Loan relationships: a short guide: how are taxable amounts computed?

What is taxable under the loan relationships rules?

Amounts arising on loan relationships are taxed (바카라 사이트˜brought into account바카라 사이트™) under CTA09/PT5/CH3.

CTA09/S307 sets out the 바카라 사이트˜general rule바카라 사이트™ that the 바카라 사이트˜credits바카라 사이트™ and 바카라 사이트˜debits바카라 사이트™ to be brought into account are those recognised in accordance with 바카라 사이트˜generally accepted accounting practice바카라 사이트™ (GAAP).

These credits and debits are those which 바카라 사이트˜fairly represent바카라 사이트™:

  • all profits and losses from loan relationships (such as discounts, premiums and foreign exchange gains and losses) and 바카라 사이트˜related transactions바카라 사이트™ (see below);
  • interest receivable and payable under those relationships;
  • all expenses incurred for the purposes of those relationships and transactions (for example, legal and arrangement fees, early redemption penalties, debt collection charges and abortive expenditure).

In addition to amounts arising while the loan relationships is held, the rules tax profits and losses arising from 바카라 사이트˜related transactions바카라 사이트™ - the disposal or acquisition of rights under a loan relationship. Debt and other financial assets and liabilities can be sold or transferred, and profits and losses from the disposal are taxable under the loan relationships rules.

Generally accepted accounting practice and 바카라 사이트˜fairly represents바카라 사이트™

The credits and debits are those which 바카라 사이트˜taken together바카라 사이트™, 바카라 사이트˜fairly represent바카라 사이트™ the profits and losses from the loan relationship. The taxable amounts are those computed in accordance with GAAP. GAAP means International GAAP (바카라 사이트˜IAS바카라 사이트™) or UK GAAP (see the Business Income Manual BIM31000).

Broadly, the loan relationships rules are a 바카라 사이트˜follow the accounts바카라 사이트™ regime. See CFM33020 for more on the meaning of 바카라 사이트˜taken together바카라 사이트™ and 바카라 사이트˜fairly represents바카라 사이트™. If there are computational adjustments which have the effect that amounts arising in the accounts are not brought into account as credits, or debits that do not arise in the accounts are brought into account in the tax computations, you will need to consult the full guidance. You will need to do so in particular where the loan relationship is between connected parties, or between companies in the same group, or where a company is a member of a partnership (CFM30190).

If a company does not draw up accounts in accordance with GAAP (non 바카라 사이트˜GAAP compliant accounts바카라 사이트™), its taxable credits and debits are those which would have arisen if GAAP compliant accounts had been drawn up in accordance with GAAP.

No distinction between capital and revenue, or between P&L and reserves

The rules make no distinction between capital and revenue items (CTA09/S293(3). The crucial distinction is between 바카라 사이트˜trading바카라 사이트™ and 바카라 사이트˜non-trading바카라 사이트™ amounts (CFM30180).

Credits and debits are taxable wherever they arise in the accounts, whether in the profit or loss account, or in reserves (CTA09/S308).

Capitalised interest is allowable as a deduction, as are certain provisions (CFM33160).