Ltd co has a large loan - which had a loan arrangement fee of £10,000
Is this CT tax deductible?
Replies (9)
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Based on the VERY limited info provided ...
... I'd say maybe. If it is, some may choose to spread it over the term of the loan, others take it straight to the P&L.
But yet again we find ourselves expected to provide an answer to a question that doesn’t contain nearly enough information.
NTLR
I would say that it is almost certainly a non-trading loan relationship debit, not a deductible trading expense.
As BKD says
I would say that it is almost certainly a non-trading loan relationship debit, not a deductible trading expense.
Surely only if the loan is for non trading purposes, if for trading purposes it is an expense prior to striking the trading profit.
?
What information can you see, that I can't, which leads you to the conclusion that it is "almost certainly" a non-trading loan relationship debit?
not really a wild assumption
IMost loans are non-trade in the strictest sense. For business purposes does not equal for the purpose of the trade.
A loan large enough to warrant a £10k arrangement fee suggests to me property or debt restructuring, neither of which are for trading purposes.
In the absence of a full and comprehensive statement of facts, perhaps discussion points are more helpful to the questioner than nothing at all.
Trade v non-trade
In the context of a small or medium trading company the distinction between "trade" and "business" is academic. By definition, any expenses incurred for the purposes of the company's business are incurred for the purposes of its trade.
It can be hard to establish a creditor trading relationship but if the company is a debtor in the relationship, it only has to demonstrate that it incurred the debt for the purposes of its trade (or business). It doesn't matter whether the loan is to provide short or long term working capital or to finance assets (current or fixed).
In which case ...
... I'd say that, by happy chance, bajones is correct. It doesn't sound as if the loan is for trading purposes at all.
But the difference may be academic - the deficits will still be allowable against other profits of the same period. The only implication being how/whether any unused deficits can be utilised in the future.