Company A lent some money to another unconnected company (Company B) few years ago.
Company A has now been acquired by a couple jointly owning 100% of the share capital. The wife is also 80% shareholder of the Company B. The creditor company do not have resources to repay the money borrowed and the shareholders of both the companies have agreed to write this off.
I understand the general rule is that where the debtor and creditor in a loan relationship are connected in any part of an accounting period and the whole or part of a loan is written off, then this is effectively a ‘tax nothing’. I just want to confirm if the above transaction will meet this requirement. The wife clearly controls Company B but controls 50% of Company A.