LAM07100 - Trade profits: Taxable investment income and gains

Where trading assets are held for the purposes of the long-term business, and give rise to investment income, that income is taken into account in arriving at profits under CTA09/S 35. FA12 specifically includes:

• dividends and other distributions regardless of whether they would otherwise be exempt FA12/S111. This does not apply to distributions of a capital nature, which are excluded
• index-linked gilt-edged securities, unless they back PHI linked liabilities, as the rules in CTA09/S400 onwards are dis-applied by FA12/S112

Included under normal CTA09/S35 principles are:

• property income, which is an exception to the usual property rules. Inclusion is required by CTA09/S201(1A)
• loan relationship debits and credits CTA09/PART5
• profits and losses from derivative contracts CTA09/PART7
• debits and credits in respect of intangibles CTA09/PART8

Life insurance companies reporting under either UK GAAP or IFRS will generally value investments at market value. Any valuation movements on shares and securities which are reflected in the income statement, and are not long-term business fixed capital, should be included in trade profits.