My client (A Ltd) purchased 100% of the share capital of B Ltd in 2006. The purchase was partialy funded by a director's loan account and partly by cash lent to A Ltd by B Ltd.
B Ltd is now in receivership. The value of A' Ltds investment in B Ltd has been written down to zero and the capital oss can only be offset against capital profits.
The loan creditor in A Ltd hasn't been written off as yeat as the receiver may try to recover it. However, A Ltd is now insolvent but not in receivership.
What would the tax treatment of the loan be if it was written back? I understand it could be treated as tax neutral if B Ltd was still trading and both companies wrote off the balance. Now that B Ltd is in receivership is this still the case?
Many thanks
Tracy