ACCA ATX UK Syllabus A4. Corporation Tax - Non trading deficit - Notes 2 / 5
Non trading loans
If interest payable on a non trading loan is more than the interest receivable on non trading loans then a non trading deficit will be created.
Any amount of the deficit can be used
against total profits of the current chargeable accounting period
against interest income of the previous 12 months
against future total profits
for group relief
Illustration
Cobble Ltd. has interest income of £10,000 and interest payable of £20,000 in the year ended 31 December 2024, they also have trading profits of £3,000 and gift aid donations of £1,500 in the year ended 31 December 2024 and the year ended 31 December 2025.
How will this non trading deficit get tax relief?
Solution
Non trading deficit
Interest receivable £10,000
Interest payable (£20,000)
Non trading deficit (£10,000)Year ended 31/12/2024
Trading profits £3,000
Non trading deficit (£1,500)
Qualifying charitable donations (£1,500)
Taxable trading profits NilGift aid donation wasted for the year ended 31/12/2024
Notice that the company can choose the amount to use in the current year and in this case restricts the loss relief to £1,500 in order to save the gift aid donation.
Year ended 31/12/2025
Trading profits £3,000
Less:
Non trading deficit (£1,500)
Trading profits £1,500
Less:
Gift aid donation (£1,500)
Taxable trading profits NilAgain, only £1,500 was used to preserve the deduction of the gift aid donation.