Readers' forum: Corporate losses

During his working life my client operated as a sole trader but also had a limited company. The company traded mainly with the unincorporated business but also sold some items to third parties. The trade in the limited company was loss-making and the company owed my client £200 000 on his death. The widow inherited the entire estate including the loan to the limited company.

We are considering incorporating the former sole trade which employs various family members who will become directors of the new company. The widow is planning to reduce her estate soon by giving away assets. One plan is to transfer the loan to the limited company to the younger generation and then to write it off creating capital gains tax losses for the children. The company is carrying forward losses in excess of £200 000 so corporation tax is not likely...