London: +44 (0)20 7236 2601
St Albans: +44 (0)1727 869141
Rickmansworth: +44 (0) 1923 771010
Milton Keynes: +44 (0)1908 605552

Budget 2009 - Loan and debt relationships between connected companies

With effect from Budget Day (22 April 2009), companies may release debts owed to them by connected companies (often, those under common ownership) without triggering a tax charge. Until now, a company that was released from a trading debt owed to a connected company would be taxed on this release – but the other company would not benefit from tax relief for granting the release. If the companies are not connected, the existing rules will continue to apply - the company that owes the trading debt will be taxed (unless the release is part of a statutory insolvency arrangement) and the creditor will continue to get tax relief.

For accounting periods beginning on or after 1 April 2009, the rule that only allows a company a tax deduction for interest payable to a connected company outside the loan relationship rules (normally when the lender is not resident in the UK) when it is paid, will be changed. In future, this will remain the case only where the lender is resident in a ‘non-qualifying territory’ (broadly, a tax haven).

Tax deductions for other interest will be granted on an accruals basis (ie they will follow the treatment in the accounts).

Comment on this blog in the space provided below, or visit my profile for details of how to contact me.

David Mansell is a Corporate Tax Partner at Mercer & Hole.

 

 

Date: 22nd April, 2009
Author: David Mansell

SHARE THIS

Articles from this Author

Contact Business Service Partners

Choose from the drop down menu below to select a Partner to contact.

Tweet

Michael Lapham shortlisted in the Money Management Financial Planner Awards 2017 bit.ly/2fL8VXBtwitter.com/i/web/status/8…

#Farming trading as a #partnership potential #tax pitfalls and tips @mercerhole Phil Fenn insight shar.es/1SHZhc @accountancylive

Follow

LinkedIn

For the latest Mercer & Hole news, visit our LinkedIn page mercer-&-hole

Click here to follow us on LinkedIn