Intercompany Loan

Intercompany Loan

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Company A, which is owned by husband and wife 51/49 share split, loaned money to Company B owned by 4 shareholders, 25% each, including the husband and wife of Company A.  Loan was used for start up costs and funding one employee.

Company B has lost money since the word go so it's been decided to wind this down.

Husband and wife want to use the funding of the loan against their corporation tax liability.  As far as I'm aware, the initial funding is not a deduction to thier income for Corporation Tax purposes and neither would it be when the loan is written off as this would be an extrodany item. 

Husband and wife are looking for an alternative that would put them in a better tax position.  But my only thoughts would be if Company B invoiced Company A for services and the loan instalments were in fact used to pay the invoices.  This doesn't sit right with me as the loan instalments started in January this year.  Also, Company B is VAT reg. so this would just create another tax liability, which Company A would have to fund!

Company B has never had a profit so any losses could not be offset against past years.  But could this be termed as a group for Corporation Tax purposes?

Any suggestions would be very much appreciated.  Complication is that husband and wife are friends (and there is a lesson learnt there!!)

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