This site uses cookies. By continuing to browse the site you are agreeing to our use of cookies. To find out more about cookies on this website and how to delete cookies, see our Cookie Policy.
Analytics

Tools which collect anonymous data to enable us to see how visitors use our site and how it performs. We use this to improve our products, services and user experience.

Essential

Tools that enable essential services and functionality, including identity verification, service continuity and site security.

Where Taxpayers and Advisers Meet

Company Debt Assignment

AnthonyR
Posts: 305
Joined: Wed Feb 08, 2017 2:33 pm

Company Debt Assignment

Postby AnthonyR » Mon Mar 16, 2020 6:45 pm

Client owns and runs Trade Co and Prop Co 100%.

Over the years Trade co has loaned a significant amount to Prop Co to finance the purchase of property.

Client is now considering selling Trade Co and needs to tidy up the loan account prior to sale. As connected companies a loan write off should be tax neutral, however, the client wants to leave the loans in place for now as they are considering transferring shares in Prop Co into trust and wants to maintain the reduced value as a result of the loan account.

Is it possible to set up a new company (Loan Co) and assign the debt across to Loan Co for nil consideration without triggering a tax charge? I can see that this is possible within a group, but with a degrouping charge if he then sells within 6 years, so not suitable in this case.

The assignment would appear to be a related transaction for the purposes of the loan relationships rules so on the basis that this is a connected party transaction does this mean that it is tax neutral for both Trade Co and Loan Co or am I missing something and will this create a tax charge?

Any help would be appreciated.
Anthony Rogers LLB CTA TEP
Fusion Partners LLP
anthony@fusionpartners.co.uk

Return to “Company Taxation”