Can someone help me out with the following scenarios please to ensure I am correct?:
company A owns 60% of company B. B ceases to trade and has no assets, it owes £x which is a combination of loans from A to B to aid cash flow and some unpaid services provided from A to B.
tax implications -the write off of balances is dealt with as follows:
company A the write off of both balances does not attract any tax relief.
company B - the release of debts are not subject to corp tax.
the same as scenario 1 but A only holds 40% of B and the remaining shareholders are not connected with A at all.
inrespect of the write off of the trade debt and loan write off:
A. Trade debt results in a bad debt whereby CT relief Is available.
loan write off is added back and dealt with as a non trade deficit ( can this Be offset against trading income?)
Company B - both amounts would Be taxable (if applicable - which is unlikely as its insolvent)