The vast majority of companies will have loan relationships and so will need to consider how they are taxed under the loan relationship rules. There are also specific provisions dealing with relevant non-lending relationships and other deemed loan relationships.

Companies are generally taxable on the debits and credits that are recognised in their statutory accounts in respect of their loan relationships and related transactions. The legislation is specific about the debits and credits that are taxable, and the basis of the accounts that they are drawn from.

Profits arising from a company’s loan relationships are taxed as income, either as part of the company’s trading profit or as non-trading income. The tax treatment of loan relationships differs slightly depending on whether the loan relationship is for trading or non-trading purposes. Therefore, in order to determine the tax treatment of its loan relationships, it is first necessary for a company to establish the purpose of the loan. It will then go on to calculate the relevant debits