Company loan relationship (UK corporation tax)
A company’s loan relationship is broadly a money debt arising from lending money, subject to statutory rules. Taxable debits and credits, including interest, are classified by reference to the purposes for which they arise. Trading amounts are brought into the trade computation; non-trading amounts are aggregated separately to determine a non-trading profit or deficit. Deficit relief and special restrictions require their own rules and are excluded from the current TX syllabus.
Worked example
A company borrows for its trading premises and incurs £5,000 qualifying interest during its accounting period. Assuming the debit relates wholly to the trade and no special restriction applies, it is brought into the trading profit computation. Interest on a separate loan used to buy an investment is considered under the non-trading rules instead.
Common mistake
Assuming all company interest automatically belongs in trading profit, regardless of the purpose of the borrowing.
Where it appears in your exams
| Qualification | Exam | Relationship | Period |
|---|---|---|---|
| ACCA | TX (UK) | Direct | June 2026–June 2027 |