Kevin Read highlights a recent case concerning the loan relationship rules for companies.
Under the loan relationships rules for companies, debits on loan arrangements are not deductible for corporation tax purposes in the following circumstances:
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Generally, no deduction is given for releasing, impairing, or writing off a receivable from a connected company (CTA 2009, s 354). Two companies are connected if one controls the other or both are controlled by the same person, subject to certain exceptions.
‘Control’ includes the power to ensure that the company’s affairs are conducted according to the person’s wishes, whether through shareholding, voting power, articles of association or other regulating documents (CTA 2009, s 472).
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Debits are ignored for tax purposes if the loan is for an unallowable purpose (CTA 2009,
