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HMRC internal manual

Corporate Finance Manual

Loan relationships: non-trading profits and deficits

What is a non-trading loan relationship?

A company will have a non-trading loan relationship if it is not a party to that loan relationship for the purposes of its trade. For example, if

  • it has no trade, such as an investment company, or
  • it has a trade, but it holds a loan relationship for investment or other non-trade purposes.

Note that a property or overseas property business is not treated as a trade for this purpose, nor is a mine or railway etc under CTA09/S39.

Non-trading credits and debits

Any credits and debits that are not brought into account as trading income and expenses are termed ‘non-trading’ profits and deficits (CTA09/S301(2)). The company arrives at the amount to be brought into account, by aggregating the non-trading credits and debits from loan relationships (including deemed loan relationships under CTA09/PT6).

Where the result is a surplus of non-trading credits, or where there are only non-trading credits, the amount is chargeable as income under CTA09/S299.

Where the result is a surplus of non-trading debits, or where the company has only non-trading debits the amount is treated as a non-trading loss and dealt with in accordance with CTA09/PT5/CH16.

Relieving non-trading deficits

The basic rule is that non-trading deficits are carried forwards and set against non-trading profits in succeeding accounting periods (CTA09/S457).

But this does not apply to so much of the deficit as is

  • surrendered as group relief under ICTA88/S403, or
  • subject to a claim for the deficit to be set off against

    • any profits of the deficit period (under CTA09/S459(1)(a) and S461),
    • or non-trading credits arising in the previous 12 months before the deficit period (CTA09/S459(1)(b) and S462).