PTP's Tax Tip No.12 ' Waiving of a director's loan

Q: Some time ago my client acquired stock on behalf of his trading company as the company was experiencing cash flow difficulties. The stock was then sold on to the company and the amount was left outstanding on director's loan account. The company's balance sheet shows negative net assets and the director wishes to formally waive the loan. The release of the loan will be credited to the profit and loss account. I understand that the waiver of a loan between connected parties is not taxable. Is this correct?

A: Unfortunately not!

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