Bad debts between associated companies are now relatively simple in tax terms, thanks to this year’s budget.

No tax relief is due on a provision for intra-group debt; this represents no change from where we were before the budget.

But, on a formal release of the debt (i.e. under deed) there is no tax relief for the loss but equally there is now no tax charge for the company that has been released from the debt.

This position applies from 22 April 2009.

Cathy Corns is a tax adviser and a partner at Mercer & Hole. The views given in this blog are personal to the author.

• Email This
• Print
• Comments
• Trackbacks

When looking at whether companies are “associated”, the Revenue has historically been able to include the rights of people in partnership. This has meant that two companies, controlled by people in partnership – but with no other link to one another – could be treated as associated and find that their tax bills rose as a result.

With effect from 1 April 2008, the definition of common control will be revised, so that business partners will only be taken into account where “relevant tax planning arrangements” (put in place to reduce tax liabilities) are in place.

Further detail is awaited, but this presumably means that individuals in “genuine” partnerships will no longer have to include companies owned by their fellow partners when counting the number of associates for their own companies if there is no other commercial connection. If this proves to be the case, it will be a very welcome change.

• Email This
• Print
• Comments
• Trackbacks