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Loan Between Companies - Common Control

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Husband & wife own Parent company which owns 100% shares in company A.

Husband & wife also own 100% shares in company B.

Company A & B carry out unrellted trades but do sell goods to one another.

Company A has surplus cash & is able to loan money to B to finance the purchase of equip >£1m rather than B getting external finance.

Am I correct in thinking that as the companies are under common control taht the loan would be taxed as if made to the directors?  Company A is not in the business of making loans the only reason it is making the loan is beacuse of the common control?

If company B paid interest at market rate this would eleminate BIK on directors but company A would still have to CT on the outstanding balance 9 months after YE?

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19th Mar 2019 17:43

accountant_18 wrote:

Am I correct in thinking that as the companies are under common control taht the loan would be taxed as if made to the directors? 

No.
accountant_18 wrote:

If company B paid interest at market rate this would eleminate BIK on directors but company A would still have to CT on the outstanding balance 9 months after YE?

No BIK.
No Section 455.
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to Wanderer
20th Mar 2019 09:11

Would it not be treated as a loan to participators?

"Where a close company makes a loan or advance to a partnership (including an LLP) in which all of the partners/members are relevant persons and at least one of the partners/members is a participator in the company, then the other partners/members are likely to be associates of a participator (see CTM60150). The loan is therefore to relevant persons and the loan or advance is within CTA10/S455"

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to accountant_18
20th Mar 2019 09:14

No.

There's no partnership involved.

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to accountant_18
20th Mar 2019 09:20

Why are you quoting statutory references to how a loan to a partnership is treated, when you are asking about how a loan to a company is treated? Or is your question wrongly worded?

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to johngroganjga
20th Mar 2019 09:27

No the original question is correct. I just wanted to make sure I was covering all bases.

Although the legislation refers to partnerships the shareholders/directors are in control of both companies and wanted to be sure same legislation couldn't be applied to company.

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