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tax reliefs on impairment of loan

tax reliefs on impairment of loan - NTLD

if company converts a commercial £100k loan (to a non-controlled trading company) worth say £20k to equity, that £80k impairment is a NTLD.

If subsequently the shares were sold for say £150k, my understanding is that the gain is £10k due to the interaction with TCGA 1992 s251(3).

Does that £80k NTLD get partially reversed?

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By Ruddles
14th Sep 2017 10:25

No idea where you get £10k from. My understanding is this:

If the debt is impaired down to £20k and company then issues £20k worth of shares in exchange for the remaining debt, the base cost of the shares will be £20k -> gain of £130k on disposal.

If on the other hand, shares are merely issued in exchange for the debt, no impairment is recognised (the debt has been satisfied in full) and the base cost of the shares will be the value of the debt at the time. Let's say, £20k -> gain of £130k on disposal.

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14th Sep 2017 17:53

many thanks Ruddles for clearing that up

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