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Connected party loans

Connected party loans

I act for a number of companies under common control, that, over the years, have built up loans that will probably never actually be paid.

None of the companies are insolvent, but a certain amount of 'tidying up' is required.

There are no 'bad debts' as such, and, while the debt is probably a mixture of trade and non-trade, hopefully a formal release of the debt will ensure a tax-neutral position.

In fact, my question is an accounting one, not tax.

It doesn't seem correct to account for this through the profit and loss account, as that will distort the true trading position.  There is, after all, no trading reason for doing this.

Perhaps we could adjust the retained profits figure by way of note?  in which case is any tagging required?


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