Intercompany write off

[practiceperson]

Hi
Company A has an intercompany debtor in its books. Co A is ceasing trade. Company B has a corresponding intercompany creditor in its balance sheet. Co B is not ceasing trade

Co A is owned by Director A [100% shares] and Co B is owned by Director A [50%] and his wife [50%]

When Co A ceases and the journal is Dr P&L exceptional items, Cr inter debtor, is there a corporation tax impact and likewise is the credit in Co B's profit & los taxable [ie Dr Interco creditor ; Cr P&L]?

Or is there no tax impact because they are deemed connected for loan relationship purposes?

Thanks in advance

[Incredulum]

s358 CTA09 should exempt connected party debt from being taxable when written off.

s353 tells us to look at s466 for the connected party rules.

s466 tells us we need also to look at 467-471.

There is a connection if, in the words of the legislation, "A controls B, or B controls A or they are both under the control of the same person." 472 gives us more details regarding control. (2) is the critical one. Perhaps counter-intuitively H&W are not automatically deemed to be the same person. CFM 35120 https://www.gov.uk/hmrc-internal-manual ... l/cfm35120 tells us that normally there has to be an oral or written agreement between the two parties for HMRC to accept that they are acting together. They don't give us certainty with your H&W.

So why not transfer a smidgen of the share capital to Mr A from his wife before doing the waiver, and then you should have a better position as Mr A will control both companies.

Beware s 94 CTA 09 if this is a trading debt that you are writing off (old s94 ICTA 88).

[practiceperson]

Thank you