Chapter 9 - Loan Relationships Flashcards Preview

Paper 2: Corporate Tax & VAT > Chapter 9 - Loan Relationships > Flashcards

Flashcards in Chapter 9 - Loan Relationships Deck (6)
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A company has a loan relationship is it owes, or is owed, interest in relation to a transaction involving the lending of money


Types of Income and Expenses

LR income (credits) and expenses (debits):
- interest payable and receivable
- costs to issue the debt
- debt collection costs
- pre-loan and abortive expenses (cancellation fees or early redemption penalties)


Trade Related LR

Trade related LR: if the loan is for trade purposes, any associated income and expenses would be included in the calculation of trading profits.


Trade Related Examples

Funds used to generate income, fund working capital, loan to buy stock used in trade, loan to purchase an office or warehouse used in trad


Non-Trade Related LR

If loan is non-trade, the income and expenses are no part of the trading profits. Income needs to be deducted from the profit per the accounts figure and expenses are not allowable, thus are added back


Non-Trade Examples

Loans used to buy an investment property, loans to buy shares in a subsidiary, loans to and from other group companies