BIM37750 - Wholly & exclusively: duality of, or non-trade, purpose: loans/advances to others: whose trade purpose?
Introduction and layout of guidance
For companies chargeable to CT the tax treatment of loans and
advances is governed exclusively by the loan relationships regime
in FA96. Detailed guidance is at CFM3000. The guidance that follows
only applies to other categories of taxpayer.
On occasion a trader may advance money to another concern and
claim a deduction if it is not repaid. Where the trade comprises or
includes money lending the issue is straightforward. In other cases
problems may arise. You should in the first instance therefore
establish in detail what the trade comprises.
The court decisions in a number of cases are considered as
follows.
| BIM37753 | Temporary loans made by brewer (Reid’s Brewery Co Ltd v Male) |
| BIM37755 | Advances to secure supply of raw material (English Crown Spelter v Baker) |
| BIM37760 | Advance to secure a 10-year supply of raw material (Charles Marsden & Sons Ltd v CIR) |
| BIM37765 | Architect buying shares in client companies (Stott v Hoddinott) |
| BIM37770 | Loans by a firm of solicitors (CIR v Hagart and Burn-Murdoch) |
| BIM37775 | Solicitors guaranteeing client’s borrowing (Jennings v Barfield) |
| BIM37780 | Payment under guarantee given to exhibition (Morley v Lawford) |
| BIM37785 | By film writer to company to produce a film (Lunt v Wellesly) |
| BIM37790 | To allow subsidiaries to meet their obligations (Odhams Press Ltd v Cook & Marshall Richards Machine Co Ltd v Jewitt) |
| BIM37795 | To secure sale of subsidiary? (Lawson v Johnson Matthey plc) |
| BIM37797 | For own trade or for subsidiary's? (Redkite, Maple Ltd v Fir) |
