Ordinary course of trading

Ordinary course of trading

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Hi all

If a company sets up a sister company overseas then loans it money to start up, is this money in the 'ordinary course of trading'?

Basically B was set up in the US and spent A's money. This money was recorded as a debtor in A's accounts.

B then went under and the debt became a bad debt. For it to be allowable for tax the money must be 'genuinly irrecoverable' (which it obviously is) and the loan must have been made 'in the ordinary course of trading'.

Thanks all for any help you can give.
Ash Hodgson

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By neileg
19th Sep 2005 14:04

No
To satisfy this rule, you would need to demonstrate that the debt was built up in the same way as with any other customer. Since you would never let a customer simply spend A's money, there's no way this can be in the 'ordinary course of trading'.

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