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Inter company loan write off before company sale

Inter company loan write off before company sale

I understand that where a loan between a holding company and a subsidiary is written off the credit will not be taxable in the company which had the creditor and the charge will not be tax deductible in the company with the debtor.

If the subsidiary is sold after the write off but in the same accounting period will this still be the case?

Any advice would be appreciated, thanks.


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05th Jul 2010 11:58

Yes - but

Provided the companies are connected when the loan is released/waived etc, the creditor company gets no relief for the write-off.  However, I maintain that the debtor is only relieved from a tax charge provided that the loan is formally released by deed.  This is a bit of a drag but not too onerous.  Solicitors should be able to knock up for a few hundred quid.  In any case, if you don't do that before sale you'd surely have to do as part of the terms of sale since unless the debt is legally extinguished, whether by deed of release or contractually, it is still legally due and so the purchaser would insist on the position being formalised anyway.

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By cawas
05th Jul 2010 12:43


Thank you for your reply. I will ensure the deed is drawn up.

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