Intercompany Loan Restructure

Intercompany Loan Restructure

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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)

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By johngroganjga
15th Apr 2015 15:32

But why does it need "restructuring"?

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Replying to Matrix:
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By outdoorroberts
15th Apr 2015 15:37

Sorry I missed this part

The company has had some investment to help it grow, but the terms of this is that the current loan needs to be removed so that the company only has 1. So we are contracted to do this, we just need to do this the right way

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By johngroganjga
15th Apr 2015 15:44

In that case I would just capitalise it.

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Replying to Bacc:
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By outdoorroberts
15th Apr 2015 15:52

Why

Thanks for the reply, why would you suggest capitalising it? That would change the Share Capital from 100 to 1,500,000+ and aren't HMRC cracking down in "Thin Capital"?

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By User deleted
15th Apr 2015 16:12

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.

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By WhichTyler
15th Apr 2015 17:19

Er..

Wouldn't capitalising the loan fatten the capital?

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