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HMRC internal manual

Oil Taxation Manual

Non-residents working on the UK continental shelf: computation of profits: loan relationships - general

In general, all profits and gains arising to a company from its loan relationships are chargeable as income. In simple terms, a company has a loan relationship when it is a creditor or debtor for money. The term ‘loan relationship’ is intended to be a wide term embracing most debts that are legally money debts. Loan relationships are explained more fully at CTM51102.

The treatment of interest follows accountancy methods. It allows two authorised accountancy treatments to be used, an accruals basis or a mark-to-market basis. The accruals basis brings in interest on an accruals basis. The mark-to-market method brings in interest on a due and payable basis. Neither method uses a paid/received basis and the legislation applies to all interest paid by or to companies. It therefore applies to, for example, interest on trade debts, even though trade debts are not loan relationships. For more detailed guidance on the meaning of interest, see CTM51705+.

Although the legislation follows accountancy methods where possible there are specific areas where the exact acceptable treatment for tax purposes is specified. Examples are:

  • bad debts
  • connected persons
  • capitalised interest
  • late payment of interest
  • transactions not at arms length.

These topics are covered in detail at CTM53000.