Income Tax Act 2007 section 85

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

Section 85 allows certain interest and dividends connected to a trade to be treated as trade profits where there are insufficient trade profits to absorb carry-forward trade loss relief.

• Where trade profits are insufficient to absorb carry-forward trade losses, trade-related interest and dividends can be treated as trade profits for relief purposes
• Only interest and dividends that arise in the relevant tax year qualify for this treatment
• The interest or dividends must be income that would normally form part of the trade profit calculation, but has instead been taxed separately under other income tax provisions
• This provision exists because interest and dividends are normally taxed separately from trade profits, which would otherwise prevent carry-forward trade losses from being set against such income