Company funding another company

Company funding another company

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hi

Me and my wife are running a limited company (A) which provides it services to our clients.

Now my wife wants to pursue baking by forming a limited company (B).

So we were wondering if we could use the left over profits of A to purchase/fund the company (B), instead of we use our own personal money.

Is this possible, if  yes then what are the tax implications to both companies and to us as directors?

does the company (A) has to pay corporation tax for the part that has funded the company (B)?

Where in the Annual accounts of (A) this funding should be an entry?

any input will be appreciated,

thanks,

nc

Replies (6)

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By JCresswellTax
10th Sep 2014 17:07

General answer is yes

Company A can provide a loan to company B to fund the business.

As long as the loan is used for this purpose by company B, there will be no tax consequences.

As for the rest, just getting in their first....speak to your accountant.

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By Portia Nina Levin
10th Sep 2014 17:13

Baking?

Did you miss an "n" out there?

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By noviceComp
10th Sep 2014 17:17

Thanks JCresswellTax

I am doing my own accounts.

few more questions.

Where in accounts of Company A this loaned amount has to be declared.

Also if Company B hasn't generated any income and eventually the equipment got depreciated.

Should this Company A write off the loan as bad debt?

And if the Company A winded up and company B still active, then what happens to the loan amount?

 

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By Portia Nina Levin
10th Sep 2014 17:21

Oh dear

So, basically you are saying that you have not got a clue, but are going to insist on [***] it all up, rather than pay somebody that knows what they are doing? Good luck!

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By mrme89
10th Sep 2014 17:28

I am doing my own accounts.

Good luck.

 

Few more questions.

This is where we start charging.

 

Where in accounts of Company A this loaned amount has to be declared.

£250+vat and your answer will be revealed.

 

Also if Company B hasn't generated any income and eventually the equipment got depreciated.

Should this Company A write off the loan as bad debt?

That doesn’t make much sense. But it’s not really a loan if there is no intention of it ever being repaid, is it?

 

And if the Company A winded up and company B still active, then what happens to the loan amount?

The price is slowly going up…  

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By johngroganjga
11th Sep 2014 09:03

This is not a citizen's advice forum.

If you are doing your own accounts get on with it, and good luck.

If you feel that you are out of your depth instruct an accountant, either to do the whole job for you or to provide ad hoc advice and assistance as and when you need it.  That is what they are there for.

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