Lee Sharpe considers some relatively obscure anti-avoidance legislation, and how it may apply to smaller family companies.
The loan relationships regime applies specifically to companies (CTA 2009, s 292 et seq.). A write-off of a debt by a lending or creditor company may be ineligible for tax relief – even if the corresponding adjustment in the other company that benefits from the release is still taxable – where the loan arguably has an ‘unallowable purpose’.
Although less common, any interest or similar finance costs to fund that unallowable purpose might likewise not be allowable.
Background
A loan relationship is a ‘money debt that arose from the lending of money’, so an inter-company loan between two family companies is a loan relationship. But if, say, one company pays for some stock for another company, and
