Back to basics: Loan relationships

Speed read: A loan relationship arises when there is the lending of money. Interest payable on trading loans is deducted from trading profits income. Interest payable on non-trading loans (eg interest on a loan to buy an investment property) is deducted from non-trading profits (LR). Interest receivable will be treated as non-trading profits (LR) in most cases. Non-trading debits and credits are pooled — if the non-trading debits exceed the non-trading credits then loss relief is available for the resulting deficit. A non-trading deficit can be set off against other income in the current year group relieved carried back or carried forward. Special rules apply for connected parties.

Definition of a loan relationship