Inter-company loans

I deal with two clients who run separate businesses. The one I originally acted for recommended me to the other so I now deal with all of their personal and corporate tax matters – they are both directors and major shareholders of their own family businesses.

The company of one let’s call him Mr A and Company A needed finance for a project a few years ago.

Mr B agreed that his business Company B – which had surplus funds on deposit – would loan the money to Company A and interest was paid at an amount fixed to the bank rate.

Company A has fallen into arrears with the repayments. Mr B is obviously unhappy about this and is considering his options but naturally does not wish to fall out with Mr A over this if at all possible.

Mr A has suggested that Company...