Readers’ forum: Will loan write off be taxed as a ‘distribution’?

My client wants to use cash reserves in his own company to support a business being started by a company owned equally by his daughter and his son-in-law.

From previous queries I understand that the loans to participators rules do not apply to a loan to a company and my client’s company is ‘small’ so it is exempt from transfer pricing adjustments.

If the loan is irrecoverable there will be no relief for the loss on the connected loan relationship but the client does not mind that. The main tax risk appears to be the possibility that HMRC will regard the write-off of the loan (which is a possibility although not the intention – the venture is intended to be commercial but is not certain to succeed) as a distribution and assess my client to income tax.

My question is is there anything that...