For most UK limited companies, the cost of borrowing on a business facility is a deductible expense that reduces your taxable profit. Your Credicorp statements give you the figures your accountant needs — but it is important to use the right lines and to take advice on how they are treated under your specific circumstances.
What to look for on your statements
Your statements show each charge separately. The lines relevant to your tax return are typically:
- Interest charged on your Business Loan or Flex facility for the period.
- The flat fee on a Slice account (the 6% of the bill amount), which is the total cost of the facility rather than interest as such.
- Any arrangement or administration fees charged at the time the facility was set up or varied.
Capital repayments — the portion of your payments that reduces what you owe — are not a deductible expense and should not be confused with the interest or fee element.
How your accountant uses this
In accruals accounting, interest is recognised in the period it accrues, not necessarily when it is paid. Your monthly statements show the charge for each period, which is what your accountant needs to match the cost to the correct accounting period. For a Business Loan with fixed repayments, your repayment schedule breaks down each payment into its capital and interest components.
A note on advice
The deductibility of financing costs depends on a number of factors, including transfer-pricing rules if there are group relationships, and the corporate interest restriction rules for larger borrowers. This article is a guide to what your statements contain — your accountant or tax adviser should determine the correct treatment for your company's position.
We lend only to UK limited companies and LLPs, and the loan is to the company with no director personal guarantee. As business finance outside the consumer-credit regime, it is not covered by the Financial Ombudsman Service or FSCS.
See also: What records do I need at year end for my Credicorp facility?, How do I get a statement to share with my accountant?.