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Our client is a trading company with its shares held 100% by a parent company (there are no other companies in the group). The parent's only income is dividends from the subsidiary and the only expenditure is loan interest on the amounts borrowed to buy the subsidiary.
We have the following three questions and should be extremely grateful to Taxation readers for their thoughts on these points.
Our client is a trading company with its shares held 100% by a parent company (there are no other companies in the group). The parent's only income is dividends from the subsidiary and the only expenditure is loan interest on the amounts borrowed to buy the subsidiary.
We have the following three questions and should be extremely grateful to Taxation readers for their thoughts on these points.
1. Is the parent classed as trading for corporation tax purposes (as it then becomes an associate for the subsidiary and significantly increases its tax liability)?
2. If not can the taxable loss (i.e. the interest paid) still be group relieved?
3. Could the interest be paid by the subsidiary instead and treated as a taxable expense for that company?
We look forward to replies.
Query T16 994 – ACR.
Reply by Chiltern:
In our view the parent ('ParentCo') is not trading because its...
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