Corporation Tax Act 2010 section 46

Use of trade-related interest and dividends if insufficient trade profits

Section 46 allows certain investment interest and dividends connected to a trade to be treated as trade profits for the purpose of absorbing carried-forward trade losses, where the actual trade profits are insufficient.

• Where a company makes a trade loss and carries it forward but has insufficient trade profits in a later period to absorb the loss, trade-related investment income can help fill the gap.
• Interest and dividends from investments that would normally be treated as trading receipts — but have already been taxed separately — can be reclassified as trade profits for loss relief purposes.
• This reclassification applies for the purposes of the carry-forward loss relief rules, increasing the amount of trade profit available to set against the brought-forward loss.
• Only interest and dividends that genuinely relate to the trade and would otherwise have been included as trading receipts qualify for this treatment.