Loan write off converted to shares
A trading Company loaned £100,000 to an unconnevted Company. In the same accounting period the loan was written of as recovery was unlikely due to failed planning application by the investee company. As they couldnt afford repayment shares were offerred to the investor company.
We were not made aware of the share purchase agreement and as the shares were probably worthless due to only a hope factor the loan was written off and a CT deduction claimed on the £100,000.
Does the fact that the Share purchase agreement includes consideration of £100,000 for the shares deny the write off of the loan or could it be argued the shares have no base cost and the loan was correctly written off CT relief claimed and the shares have no value.
Any thoughts or experiences !
You may have a problem
You cannot write off the loan, because it was satisfied in full by the issue/transfer of shares. The fact that the shares are/were worthless is irrelevant. You may have a capital loss on disposal of the shares (but not before then - if they were worthless when acquired, no neg value claim available)