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Ten years ago, a sole director advanced a loan of £200,000 to his 100% controlled one man trading company to enable the trade to continue and survive.
The company's annual figures are turnover, £60,000; pre-tax profit, £8,000; and director's remuneration, £nil.
The balance sheet has always shown an excess of liabilities over assets and that the director resolves to continue to support the company by not withdrawing his unsecured interest-free loan to the company.
The loan is now all but repaid by the company to the director, who is now of pensionable age.
Ten years ago a sole director advanced a loan of £200 000 to his 100% controlled one man trading company to enable the trade to continue and survive.
The company's annual figures are turnover £60 000; pre-tax profit £8 000; and director's remuneration £nil.
The balance sheet has always shown an excess of liabilities over assets and that the director resolves to continue to support the company by not withdrawing his unsecured interest-free loan to the company.
The loan is now all but repaid by the company to the director who is now of pensionable age.
If the terms of the interest-free loan are varied today so that interest is calculated on the credit balance (commencing from ten years ago) will this term variation prevent the interest charge from being an allowable corporation tax deduction?
If the interest payable to the director is...
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