Corp Tax - Chapter 8

Question 1

Loan relationship examples…

Answer 1

Debentures in a company
Government Gilts
Bank Deposit account
Bank overdraft
Loan to an employee

Question 2

Loan relationship income and expenses examples:

Answer 2

• Interest payable and receivable
• Costs to issue the debt
• Debt collection costs
• Pre-loan and abortive expenses
• Profit or loss on the acquisition or disposal of an existing loan relationship
  (called a related transaction)
• Loans written off (known as impairments or bad debts) – result in expense in the company writing the debt off
• Release of loans –
  – an expense in the company which has released the debt; and
  – income in the company that has had its obligation to pay the debt
  released (unless the release is part of a statutory insolvency
  arrangement).

Question 3

Late Interest Payable to Participators in Close Companies

Answer 3

Accruals Basis

Question 4

When is interest deductible

Answer 4

Interest is deductible when it is paid if:
- it is payable to a participator (or their associate) in a close company; and
* it has not been paid within 12 months of the end of the accounting period;
* it has not been taxed under the loan relationship rules in the hands of the recipient

Question 5

What is a close company?

Answer 5

• Five or less people
• Not controlled by a non close company

Question 6

When is interest not taxed under LR rules

Answer 6

Tax haven countries