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Writting off investment in subsidiary

A client company has shares in 100% owned UK subsidiary, the subsidiary has no value

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My client has approx. £50,000 investment (shares) in a subsidiary which is now dormant and has no assets.  The subsidiary will be voluntarily struck off shortly.  How should this write off be shown in the Accounts / P&L of the holding company and what is the treatment of the loss in the Corporation Tax computation?

 

 

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By paul.benny
22nd Jun 2021 12:57

FRS105? Not preparing consolidated accounts?

You'd need to show the write off in the investments note. I think I'd show as Other Expenses with an explanation in the notes.

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Replying to paul.benny:
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By David Boorn
22nd Jun 2021 13:20

They haven't prepared consolidated accounts as the subsidiary has not traded for a number of years.

Is the write off an allowable expense in the P&L, which will create a CT loss to set against other profits?

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By David Ex
23rd Jun 2021 00:32

Quote:

Is the write off an allowable expense in the P&L, which will create a CT loss to set against other profits?

I’m a bit out of date but I don’t recall the write down of subsidiary companies giving rise to a trading loss.

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Replying to David Ex:
Psycho
By Wilson Philips
23rd Jun 2021 10:48

Nope, you're still up to date :¬)

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By Dib
22nd Jun 2021 13:13

What happened to the sub's assets?

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By David Boorn
22nd Jun 2021 13:22

The subs. assets where sold some years ago, and the proceeds distributed by way of dividends.

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Replying to David Boorn:
Psycho
By Wilson Philips
22nd Jun 2021 13:48

What do you mean by “some years ago”?

Had sub been a trading company?

How much was the dividend to parent?

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By David Boorn
22nd Jun 2021 14:09

The company hasn't traded for at least 10 years and any distribution was before that. All this was before my time.
I think the subsidiary was kept for sentimental reasons, as it was incorporated in 1914.

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Replying to David Boorn:
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By Wilson Philips
22nd Jun 2021 14:48

You said that the company sold its assets and then distributed the funds to parent?

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By paul.benny
22nd Jun 2021 13:40

I'm not a tax specialist so I won't comment on the deductibility.

I am rather wondering why the write-down wasn't booked when the assets were realised and the cash dividended up. The company has evidently had no value for a while.

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