GIM5060 - Taxation of the investment return: interest and foreign dividends

Interest (other than that falling within Schedule C while it existed) and foreign dividends are the main kinds of investment income that can enter into the computation of trade profits.

For accounting periods ending after 31 March 1996 the FA 1996 rules on government and corporate debt (loan relationships) treat interest arising to a general insurer from its current assets as a trading credit (see GIM5090).

Foreign dividends may be taxed either under Case V of Schedule D or as trade profits. The Crown has the option and it should always be exercised in favour of treating the income as a component of the trade profits.

More information on the Crown option is in the Business Income Manual at BIM14035.