Section A: Objective Test

During the year ended 31 March 2024, a manufacturing company received £5,000 in bank interest and paid £2,000 in interest on a loan used to purchase a let investment property. How are these amounts treated in the Corporation Tax computation?

For Corporation Tax, interest received (such as bank interest) and interest paid for non-trading purposes (such as a loan to buy an investment property) are dealt with under the loan relationship rules. They are aggregated to find a net non-trading loan relationship (NTLR) credit or deficit. Here, £5,000 credit - £2,000 debit = £3,000 net NTLR credit, which is added to total taxable profits.