BIM40801 - Receipts: interest and dividends: introduction

The circumstances in which interest and dividend income may be regarded as a trade receipt (without distinguishing whether that is for all purposes or just for loss relief) are set out at BIM40805.

Income which is a trade receipt for loss relief purposes only is distinguished in BIM40810 from that which is a trade receipt for all purposes, where interest and dividend income qualify as a trade receipt.

From 6 April 2005 receipts of alternative finance returns and profit share returns paid under alternative finance arrangements are to be treated for tax purposes as if they were interest. For further advice on alternative finance arrangements, alternative finance returns and profit share returns see CFM6060+.

Where difficulty is experienced in determining to what extent any particular item should be regarded as a trade receipt, and the amount of tax involved is substantial, further guidance can be obtained from the CT&VAT (Technical).

Interest income of companies within the charge to corporation tax is taxed under the loan relationship rules of FA96 for accounting periods ending after 31 March 1996 (see CTM50000 onwards).

FA96/S103 (2) states that a company may only have Case I treatment for creditor loan relationships if it entered into those loan relationships in the course of activities forming an ‘integral part of its trade’. For further information on this point see CTM51820.

A creditor loan relationship is where the company has made a loan, put money on deposit etc.

When deciding whether a company has entered into a creditor loan relationship as an ‘integral part of its trade’ you should be guided by the principles in BIM40805. If you experience difficulty, further guidance can be obtained from CT&VAT (Technical).