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Sense check for use of inter-company loans

Sense check for proposed approach of use of inter-company loans

I have a set of accounts prepared by my accountant for two companies (A & B for sake of discussion) within which I am both director and only shareholder. He has proposed to take advantage of some losses in company B, to reduce the tax exposure in company A, by using an intercompany charge / loan. However, for the year in question, there was no actual transfer of funds between the two companies. Is this is an appropriate / legal way to proceed?

I'd appreciate just a brief top-level explanation, confirmation whether this is appropriate or not. 

Thanks

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26th Jul 2017 22:26

There is no need for cash to change hands.

PS You should have more faith in your accountant.

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27th Jul 2017 08:59

Agree with John but, to expand, any cross charge should be commercially justifiable and, if there is no VAT group, VAT will possibly need to be charged assuming the companies are VAT registered. Charges should not be created retrospectively.

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