How best to treat an interco loan when selling?

Can a £300k intercompany loan be treated as an asset during a sale

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A Shareholder owns two companies - company A and Company B. Company A has made loans of £300k to company B in the past.

Company A is being sold to a third party and the selling shareholder wishes to take advantage of entrepreneur’s tax relief upon sale of the assets. The purchaser has no interest in acquiring the loan to company B.

What are the selling shareholders options for assigning the intercompany loan as a personal/directors loan to Company B at the time of sale of Company A?

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By David Ex
12th Dec 2023 16:49

Ed Roberts wrote:

What are the selling shareholders options for assigning the intercompany loan as a personal/directors loan to Company B at the time of sale of Company A?

Obvious options are B repays the loan or the loan agreement with A is novated (?) to the shareholder.

There might be something useful here re BADR in the circumstances:

https://www.google.com/search?q=badr+non-trading+activities+site+account...

I think it’s worth taking some professional advice.

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RLI
By lionofludesch
12th Dec 2023 16:52

The obvious option is for Company B to repay the loan, with or withour assistance from the director.

But then the incomer is buying a company with a lot of cash locked in. How does he feel about that?

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paddle steamer
By DJKL
12th Dec 2023 17:08

On what understanding re what will happen with this asset has the price been agreed upon between the parties? This might be a decent starting point.

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By Tax Dragon
12th Dec 2023 21:44

"Can a[n asset] be treated as an asset during a sale[?]"

Erm, yes, I believe so. Can said asset be distributed to the director-shareholder? Again, I don't see why not. Will that have tax consequences? Almost certainly. Is it worth taking advice? Surely you already are. If you have any sense, that is.

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