I have a UK client whose UK limited company has a substantial loan with an Irish Bank. As has happened with many Irish banks - the loan has been taken over by NAMA (Ireland's National Asset Management Agency). Negotiations are ongoing as the underlying assets (properties) are worth a fraction of their cost.
It is likely that NAMA may accept a proposal to write off much of the loan - leaving the company with a property portfolio which at market value is equal to the reduced loan. Another bank will lend the money to clear the reduced NAMA loan figure. The company would end up with a balance sheet net asset value around zero (properties less loans).
If the write-off is taxable then the massive tax bill will scupper the prospects of the proposed write-off being a viable solution.
The questions are:
1) Does this write-off of part of the loan produce a gain which is chargeable to corporation tax?
2) Does anyone know, given how many UK people are affected by NAMA, whether there has been any agreed protocol between NAMA and HMRC to dictate how HMRC will view such write-offs for tax purposes?
3) Has anyone had a similar case and had formal or informal discussions with HMRC?
Thanks for taking the time to read this.