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...Golfing holidays; In the middle
Loan to company
A Ltd has traded for 15 years owned 50:50 by our client and his father as joint shareholders and directors and funded by a £200 000 loan from father. Trade has declined the balance sheet is in deficit and there are cumulative tax trading losses of £90 000.
The loan is unlikely to be repaid and father would accept £30 000 and write-off the balance.
If the loan balance is written off this would be a trading receipt and there are insufficient losses to cover it. Father may be able to claim capital loss relief on an irrecoverable loan but the company is continuing to trade and a capital loss is unlikely to be utilised.
Would this be an inheritance tax potentially exempt transfer? The loan does not qualify for business property relief but father and mother’s joint...
