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My client is a director and majority shareholder of a trading company. Shortly after setting up the company, he made a £100,000 cash injection into the company and this was recorded as a credit balance on his current account (i.e., included in other creditors on the company's balance sheet). The client subsequently wanted another round of funding and he found an investor who agreed to invest in the company on the proviso that the director's loan be waived.
My client is a director and majority shareholder of a trading company. Shortly after setting up the company he made a £100 000 cash injection into the company and this was recorded as a credit balance on his current account (i.e. included in other creditors on the company's balance sheet). The client subsequently wanted another round of funding and he found an investor who agreed to invest in the company on the proviso that the director's loan be waived. My question is what are the corporation tax implications of writing off or waiving the £100 000 owed by the company to the director/shareholder? Does it fall under the loan relationship rules found in FA 1996 Sch 9? Also are there any personal tax implications (e.g. TCGA 1992 s 253)?
Readers' comments would be welcome.
Query T17 025 – S.G.
Reply by Thicket:
A company has a...
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