Cash in ltd co and very low interest rates

[Alpinestars]

trowelhead said:

msport123 said:

Wouldn't an inter company loan create an interest charge from company A to B? Or would company B treat the interest on the loan as an expense and therefore they would cancel each and other out?

• disclaimer - don't take this as tax advice *

I have been told by my accountant that his can be done at 0% rate of interest for as long as needed. He also mentioned it was "tax neutral" if ever i wanted to write off the loan in company a and write off the debt company b, there would be no effect on tax position.

But yes if you did the loan at a commercial rate of interest, it would cancel each other out anyway as it would be income on one side expense on the other.

If you wanted the cash back into company A, i suppose you could charge a very high % rate of interest, then use the rents to pay that interest thus moving cash back over time. That's not my intention however.

Correct re using 0% so long as both companies are small or medium sized enterprises for transfer pricing purposes, otherwise an arms' length price would need to be reflected for tax purposes.

Also correct re a loan write off as long as both companies are connected companies for loan relationship purposes and the loans are what are known as loan relationships. Both appear to be the case.

[trowelhead]

x5x3 said:

thanks - that photo does not open that well for me?

If you click it to open thumbsnap then click again it will zoom in!

[trowelhead]

Alpinestars said:

Correct re using 0% so long as both companies are small or medium sized enterprises for transfer pricing purposes, otherwise an arms' length price would need to be reflected for tax purposes.

Also correct re a loan write off as long as both companies are connected companies for loan relationship purposes and the loans are what are known as loan relationships. Both appear to be the case.

Phew - glad to hear that.

How does the write off happen in practice (simply write company minutes saying loan has been written off and nothing is due?)