Part 2Trading income
Chapter 5Trade profits: rules allowing deductions
Incidental costs of obtaining finance
C1C258Incidental costs of obtaining finance
1
In calculating the profits of a trade, a deduction is allowed for incidental costs of obtaining finance by means of—
a
a loan, or
b
the issue of loan stock,
if the interest on the loan or stock is deductible in calculating the profits of the trade.
2
“Incidental costs of obtaining finance” means expenses—
a
which are incurred on fees, commissions, advertising, printing and other incidental matters, and
b
which are incurred wholly and exclusively for the purpose of obtaining the finance, providing security for it or repaying it.
3
Expenses incurred wholly and exclusively for the purpose of—
a
obtaining finance, or
b
providing security for it,
are incidental costs of obtaining the finance even if it is not in fact obtained.
4
But the following are not incidental costs of obtaining finance—
a
sums paid because of losses resulting from movements in the rate of exchange between different currencies,
b
sums paid for the purpose of protecting against such losses,
c
the cost of repaying a loan or loan stock so far as attributable to its being repayable at a premium or having been obtained or issued at a discount, and
d
stamp duty.
5
This section needs to be read with F1—
a
section 57B(3) (which imposes a limit on the total amount that may be deducted by virtue of this section or section 57B), and
b
section 59 (which provides for restrictions in relation to convertible loans and loan stock etc.).