Non Trade interest and the adjustment of Profit for CTAX

Londina

Hi

I have a confusion over the "Non trade interest"

When you calculate the Adjusted trading profit, the proforma is:

NET PROFIT PER ACCOUNTS
add: Disallowable expenditure
less: Interest receivable
you get your Adjusted trading Profit.

Deduct the capital allowances and have the Trading profit.

Now you add:
Chargeable Gains, plus
Non trade Interest (ie Intererest receivable)
and you get the Total Profits.

My question is: the interest have already been deducted to get the adjusted trading profit, why has been added back after the Chargeable Gains to get the Total Profits?

:confused1:

Bluewednesday

Because interest receivable is not part of the trading profits, it's just separating it out.

Londina

thanks but I still dont get it.

Further example:

Net Profit per accounts £300000
Disallowable expenses £4500
Non trade bank interest £(200)

Adjusted trading profit £ 304300

Capital allowances (£6500)

Trading Profit £297800

Chargeable Gain £5000
Non Trade bank interest £200

PCTCT £303000

Why the £200 is twice in the calculation?:ohmy:

Bluewednesday

The corporation tax calculation is trading profits + chargeable gains + bank interest etc = PCTCT.

The bank interest whilst earned within the business bank account is not part of trading therefore you have to deduct it from your trading profits to get that figure. However as it is subject to corporation tax you have to include it within the pctct figure.

That's why you take it out of trading profits but add it back to get the PCTCT, it's for presentation and consistency really.