The mother company lent money to two companies in the same group (A and B) which had financial difficulties. (£200,000 to one company and respectively £100,000 to the other company).
Mother company: The father and the son are directors of the mother company, but only the son is the shareholder of this company.
Company A: The son is the only director and shareholder
Company B: The son is the only director, he has 1% of the company’s shares and the mother company has 99% of the shares.
These two companies (A and B) are now in liquidation.
My client is asking me if the mother company could take advance of the CGT relief since the mother company couldn’t recover the money lent to A and B.
I know is that due to the fact that the companies are related we cannot apply s253(4) CGT relief: loan to traders.
Looking at the HMRC manual it looks like we can apply CM 35140: Loan relationships: connected companies and impairment: exceptions: insolvent creditors
I will greatly appreciate if you could let me if the company could apply CM35140 or if there is any other HMRC legislation I am not aware of. I would like also to confirm with you the right tax treatment.
Many thanks in advance