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07 September 2021
Transfer of asset by dividend to parent company.
My client has a corporate group in which one company has a deficit on reserves but has an asset which it would like to transfer via a dividend in specie to its parent.
To do this it needs reserves at least equal to the cost of the asset and so at the moment it cannot declare a dividend.
The company has traded at a loss and could surrender the loss as group relief. It has been suggested that the claimant pays for the relief in full based on the amount of the loss not the tax effect (ie for every £100 of loss it pays £100 not £19). This would produce a credit to the tax charge in the subsidiary and would create positive reserves thus enabling a dividend in specie to be paid.
This sounds good in theory but does it work...
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