Interest Rate Swap - 'compensation'?

Interest Rate Swap - 'compensation'?

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Hi!

A client of mine has just received notification of a payment due to him in respect of an 'interest rate swap' loan.

I understand that the 8% interest added to the payment will be taxed as normal, but will the remainder of the payment be?

He is receiving approx £120k.   The loan was originally taken out to purchase some land, and the interest over the years has been deducted in the trading accounts.

My gut feeling is that, as he has had tax relief for the interest, he will be taxed on the payment.

HMRC has some guidance at http://www.hmrc.gov.uk/manuals/pimmanual/pim2140.htm, although relates to property income.

I just wondered whether it could be treated as compensation (i.e the guidance at http://www.hmrc.gov.uk/manuals/saimmanual/saim2105.htm).

I don't suppose many people have yet come across this, as this is relatively new?

Thanks in advance.

Jonathan.

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By rjoconnor81
25th Feb 2014 16:40

Was the cost of the interest rate swap cost also deducted from the tax return?

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By JonathanD
26th Feb 2014 11:04

Not sure.

 

Do you mean the 'cost' of arranging the 'loan', or the value of the loan itself? 

Would it make a difference?

 

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