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Writing off a loan balance

Writing off a loan balance

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Please could someone advise on a company who have received a loan from an external investor. The project has not worked and the loan and accrued interest have been written off by the investor.

Is the loan write off treated as taxable income in the company's tax return?

Many thanks in advance

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By eastangliantaxadvisor
03rd Sep 2012 13:43

Are the parties connected in any way?


If they are, in most cases there is no tax implication either side.


If they are not connected, then you follow the accouting treatment

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By alanw209
03rd Sep 2012 14:37

They are not connected so therefore it is written off through the P&L account and taxed as company income?

Many thanks

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By eastangliantaxadvisor
03rd Sep 2012 14:41


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By Steve Kesby
03rd Sep 2012 15:05

Has the loan been formally released?

Just because a debtor simply "writes off" (strictly it's an impairment loss) a balance in their books, that doesn't mean that the creditor should do the same.  If legally there is still a liability, the creditor should continue to recognise it.

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By david2211
04th Sep 2012 08:38

What about a bank loan of which 50% wriiten off by bank

Bank has accepted 50% write off of loan to a village social club (members club - mutually trades). Capital gain?


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By small business
09th Feb 2013 18:53

Bank OD and Business loan.

We need to deal properly with the an overdraft and the balance of a business loan which remain on our accounts. These were the subject of a full and final settlement with bank concerned, following a number of issues with them. This settlement was fully negotiated and finalised by the company solicitors. The directors paid the settlement figure from personal funds which in our view increases the already sizeable directors loan account by the amount concerned. We now have another bank. We have never  bothered to recover any of the directors loan account from the company from the early set up days and putting in money when times have been bad.

Firstly can we write down these balances against our directors loan account, reducing the company's owings to us or must they show on the profit and loss account as income to the company for tax purposes?

Secondly, the directors have reached retirement age and we would like to dissolve the company and dispose of the assets/stock to help recover a little of what we have put in as trading conditions are so abysmal at the moment. the directors loan account will not be fully paid up regardless of how lucky we are in the disposal.

The company is not cash rich by any means and we need to mitigate legally our liabilities for tax. We have asked a number of people in the field and there is no consistent agreement on this dilemma from expert sources. Hence any help or guidance would be greatly appreciated.




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