Trade Loan Write Off

DawnyDawny Settling In NicelyMAAT, AAT Licensed Accountant Posts: 60
Is a trade loan to a non related party an allowable deduction for corporation tax purposes?

Also, how should this be reflected in the Statutory Accounts of a small company?

Thank you!

Comments

  • MarieNoelleMarieNoelle Trusted Regular Hampshire/Surrey borderModerator, MAAT, AAT Licensed Accountant Posts: 1,447
    Hi Dawny, could you give a bit more information?
    A loan can not be "deducted" but interests payable are allowable deductions.
  • DawnyDawny Settling In Nicely MAAT, AAT Licensed Accountant Posts: 60
    Company A provided company B with a loan of £50,000 so that they could continue to trade. However, there is now no hope of receiving repayment of this loan and so the director of company A wants to write this off.

    There were no interest payments, it was a simple case of crediting the bank account with £50,000 and debiting a debtor.

  • KernowAccountantKernowAccountant Settling In Nicely Registered Posts: 120
    Dawny said:

    Is a trade loan to a non related party an allowable deduction for corporation tax purposes?

    Also, how should this be reflected in the Statutory Accounts of a small company?

    Thank you!

    A trade loan? Is "company A" a bank?
  • DawnyDawny Settling In Nicely MAAT, AAT Licensed Accountant Posts: 60
    No, just a small company (engineering consultancy services) with a bit of cash who was trying to help another company out. If Company B continued to trade, they may have been able to contract the services of A, but that never happened.

  • KernowAccountantKernowAccountant Settling In Nicely Registered Posts: 120
    "Company A" is party to a loan relationship as defined by s.302 CTA 2009.

    It is assumed that the companies are not connected as defined at s.466.

    Despite your description of a "trade loan", it is not a trade loan as defined by s.298, but instead a non-trade loan relationship.

    Where a valid debit arises, relief is given under s.457, subject to claims under s.403, s.459/461 and/or s.459/462. Be aware of the restrictions on debits in s.324.

    Hopefully I haven't missed something obvious. I dare say I'll soon be corrected if I have. ;-)
  • DawnyDawny Settling In Nicely MAAT, AAT Licensed Accountant Posts: 60
    Perfect, thank you for your help.
Sign In or Register to comment.