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HMRC internal manual

Company Taxation Manual

Corporation Tax: management expenses: short interest

Before the loan relationships legislation applied (i.e. for periods ending before 31 March 1996), whether short interest which was not a charge qualified as an expense of management would depend on the individual facts of a case. However, it is likely that in most cases such interest would be paid to service capital raised for the purpose of making investments. Such interest would not be regarded as an expense of management on the authority of:

  • Bennett v Underground Electric Railway of London Ltd 8TC475, and
  • London County Freehold and Leasehold Properties Ltd v Sweet 24TC412.

An example of short interest, which was not a charge, is short interest payable to a non-UK bank. There is a definition of charges at CTM09010.