Income Tax (Trading and Other Income) Act 2005 section 51A

Cash basis: interest payments on loans

Section 51A provides that when calculating trading profits on the cash basis, no deduction is allowed for interest paid on loans, subject to an exception in section 57B.

• When using the cash basis to calculate trading profits, interest paid on loans cannot be deducted as an expense.
• This restriction applies specifically to businesses that have elected to use the cash basis of accounting for tax purposes.
• An exception to this rule exists under section 57B, which may permit a deduction for certain interest payments.
• Traders using the cash basis should review section 57B to determine whether any of their interest costs qualify for relief.