Corporation Tax Relief

by **Tax advice** on Mon Jun 20, 2011 3:25 pm

Hi All

My company A Ltd took loan amounting to £15,000 to start a project but this project could not stat. I gave this loan/ or made investment in second company B Ltd in which I am 25% shareholder. The company B Ltd ended with heavy losses and returned investment amounting to £10,000 to A Ltd. My question is now how can I treat £5,000 (£15,000-£10,000 loss in the books of A Ltd. Is it investment loss or bad debts and what is the implication of corporation tax relief in A LTD?

Thank for very much for your help in this matter.

Best regards

by **collich** on Mon Jun 20, 2011 4:37 pm

Is this a tax question or an accounting question?

If it is a tax question - I would say that it is a non-trade loan relationship debit. I presume B Ltd has been released from the £5,000 debt.

by **Tax advice** on Mon Jun 20, 2011 4:54 pm

Hi Collich
Thank you very much for your reply. I want to know that if A Ltd can get corporation tax relief on the loss of £5000.
Best regards

by **Incredulum** on Mon Jun 20, 2011 5:21 pm

A and B are completely unconnected apart from your own 25% stake in B?

by **collich** on Tue Jun 21, 2011 12:09 pm

Assuming they are not connected - Company A will get a non-trade loan relationship debit.

Whether it will get relief for the £5,000 depends on what other profits the company makes.

by **Tax advice** on Mon Jun 27, 2011 2:33 pm

Hi Collich

Thank for your reply.
Say company A has £20,000 net profit from its consultancy work, can company A deduct £5,000 from its profit and pay corporation tax on £15,000?

Best regards

by **Incredulum** on Thu Jun 30, 2011 2:48 pm

Incredulum wrote:A and B are completely unconnected apart from your own 25% stake in B?

Are A and B completely unconnected apart from your own 25% stake in B???? Do they own shares in each other? Are the shareholders in the two companies related/in partnerships?