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Inter-company loan write off

Connected company and loan write off includes interest

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Company A owns 80% of Company B. Over the years it has loaned it £100k plus charged interest so the current loan balance is £125k (approx).

Company A is selling 60% of its shares in Company B and it has been agreed that the loans between the companies will be written off. My Q is twofold:

a.) Under S466 CTA 2009 if the companies are connected at any point in an accounting period, they are classed as being connected for the whole accounting period. Therefore, even though on the date of sale they will only own 20% of B, if the loan is written off on the same day this is not an issue in terms of the credit in B not being taxable as per s358? Is my understanding correct?

b.) The fact that A has charged interest to B whom has claimed CT relief on the interest, the whole write off of £125k is not taxable in B, it is not split between loan not taxable and interest taxable?

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By Matrix
18th Feb 2020 10:01

No you will have to reverse the 25k interest deduction in B and the opposite in A assuming interest was booked.

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Replying to Matrix:
Psycho
By Wilson Philips
18th Feb 2020 12:30

Says who?

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By The Dullard
18th Feb 2020 13:25

I think you mean whom.

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Replying to The Dullard:
Psycho
By Wilson Philips
18th Feb 2020 15:47

No - it may be grammatically incorrect but I know exactly what I meant.

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