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

F2a

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

b

section 59 (which provides for restrictions in relation to convertible loans and loan stock etc.).