I am looking for help in the best way to restructure a loan between a parent company and subsiduary (both UK).
The current parent company provided the subsidiary with a £1.5m loan some time ago, but it was only this year that the company acquired the subsidiary.
The 2 options I have in mind are:
1. A voluntary waiver of the loan
2. To capitalise the loan
I obviously want to do this in the most tax efficient way but I am unsure as to what is tax deductable/neutral as the loan was made when the companies weren't related (and now they obviously are).
Can anybody help?
Thanks
Replies (6)
Please login or register to join the discussion.
Tax is not relevant
What is the alternative? Write the loan off? No tax impact, but think what that would do to the parent's balance sheet.
No need to issue 1.5m shares - you could issue just one (although, granted, the consequent premium would give the same 'capital' total). But in any event I'm not sure that you understand what is meant by thin capitalisation.