Hi there,
Can anybody give me some advice on this matter:
1. Company A receives £X, as part of its normal line of business.
2. Company A loans Company B £X, so entering into a new line of business (the lending of money for profit.)
I understand that Company A will suffer corporation tax on all interest payments received from Company B. However, I am unclear as to whether the initial payment of the loan capital qualifies as a tax-deductible expense for Company A. Can anybody please clarify this for me?
I have been informed that the initial loan payment is a tax-deductible expense for Company A, and it also does not qualify as taxable income for Company B. Where I am confused, is that this seems to totally remove the need to pay corporation tax on the loan principle, £X. Or perhaps the corporation tax on the principle would be due when the principle was repaid, either in full or in part?
Any advice is very much appreciated.
D.
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