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.