Well since you're investment management.
spidersong | Tue, 17/06/2014 - 09:16
I'd be surprised if HMRC didn't look for it to be included in your PE calculations.
The PE notice and guidance from HMRC (http://www.hmrc.gov.uk/manuals/pemanual/PE1400.htm ) does say that you should exclude bank interest from the calculations where it's incidental to the activity of the business and not an aim in itself. What they're looking at is making sure that normal businesses that just hold a bank deposit account for any liquid funds don't have to do PE, and so that any interest doesn't distort the calculation for PE businesses since there's normally little activity associated with it.
The term we used to use (and I still do use) in my HMRC days was 'actively managed'. If excess funds were actively managed to generate the best return for the business then we viewed it as a non-incidental business activity and it went in. If people just chucked it in the same old deposit account each and every time then it was incidental.
So if you're moving money from account to account depending on the returns available, and in and out of money markets, making loans etc. then I'd say the funds are actively managed and it's into PE. If you just stick it into
a high interest account or do the odd bit and bob and forget about it till you need it leave it out.
But as my title hints, if you're an investment management company HMRC are likely to assume that you do actually manage your own investments, and assume that the interest is in, so if you do think its incidental you may find yourself arguing the toss. Although HMRC do seem to give a wider interpretation of incidental that there used to be if you look at their first example in the link (but you will note they specify that the company is a non-financial company so seem likely to draw a distinction with and investment management company managing investments).
Just for info; the largest organisation I deal with actually has a treasury team moving money back and forth each day, dealing with money markets, making loans etc. so for them I treat all their interest receipts as exempt and valid for inclusion in their PE calculation.
EDIT: Just to deal with the actual query; I'd say it's never going to be outside the scope, the interest is exempt income whatever happens as it's a supply made in the course of business. The question is whether it's a significant enough supply to be included in your PE calc