Ltd Co Investment in another Ltd Co

Ltd Co Investment in another Ltd Co

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The previous accountants (the client being new to me this year) had shown all monies being paid from Co A to Co B as Directors Loan Account "drawings" against Co A sole Director, whereas the Director is claiming that as it was used to fund investments in Co B this penalises him.
Any thoughts Please?

Janniehr

Replies (4)

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By Tosie
09th Aug 2006 21:29

Agree with previous accountants
Two companies are seperate legal entities
and the money paid over is a loan.

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Euan's picture
By Euan MacLennan
10th Aug 2006 10:22

Loan to company
Money lent by Co. A to Co. B is exactly that - a loan from Co. A to Co. B, with no s.419 consequences. Interest can be paid by Co. B to Co. A without deduction of income tax.

Unless:
1. there is some legal agreement that Co. A is lending the money to the director who, in turn, is lending it to Co. B, in which case Co. A will be liable to s.419 tax and any interest paid by Co. B to the director will be subject to CT61 tax deduction.

2. Co. A bought the share in Co. B for the total amount of the money. In that case, it would be a fixed asset investment in Co. A and a hefty undistributable Share Premium in Co. B.

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By troubleshooters
10th Aug 2006 09:54

But is it....
a loan to the director or to another company?

Personally I would have shown this as a related company loan and not a directors loan which would be taxed under S419.

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By jsriram36
10th Aug 2006 10:47

Treatment of Corporate Investment
I would like to add as follows:
1.If A company buys shares in B company and B company is an associate company its treated as Investment in Associates in A company.
2. If the percentage of shareholding is more than 50% then the A company becomes a Holding company and the B company becomes a subsidiary company.

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