Trading loan
UK tax.
Where a company borrows or lends money for the purpose of its trade.
When a non-financial trading company borrows money, then most loans will be for the purpose of its trade (for tax purposes). The only general exception to this is where the loan is taken out to buy an investment such as shares in another company. Anything to do with purchasing shares is considered to be non-trading for UK tax purposes.
If a non-financial trading company lends money, then this will be treated as a non-trading loan for UK tax purposes. It is considered that only banks and finance houses have a trade consisting of lending money.
The tax treatment of trading loans is generally more favourable for the taxpayer, compared with non-trading loans. This is mainly to do with the ways in which gains and losses may be offset with more flexibility in relation to trading items.
