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HMRC internal manual

Business Income Manual

Specific receipts: interest and dividends: introduction

The circumstances in which interest and dividend income may be regarded as a trade receipt are set out at BIM40805. Where interest or dividend income would be a trading receipt but for the fact that it is subject to tax under provisions other than the trade profits provisions, it may nevertheless be treated as part of the profits of the trade for loss relief purposes only. See BIM40810.

Receipts of alternative finance returns and profit share returns paid under alternative finance arrangements are treated for tax purposes as if they were interest. For further advice on alternative finance arrangements, alternative finance returns and profit share returns see CFM44000 onwards.

Where difficulty is experienced in determining to what extent any particular item should be regarded as a trade receipt, and the amount of tax involved is substantial, further guidance can be obtained from CTISA (Technical).

Interest income of companies within the charge to Corporation Tax is taxed under the loan relationship rules, see CFM30100 onwards. A company will only have trading loan relationships as a lender if it is party to a creditor relationship in the course of activities ‘forming an integral part of the trade’ (S298 Corporation Tax Act 2009). This will usually only apply to companies such as banks, insurers and financial traders. When deciding whether a company has entered into a creditor loan relationship as an ‘integral part of its trade’ you should be guided by the principles in BIM40805. If you experience difficulty, further guidance can be obtained from CTISA (Technical).