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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4416
Experience:  FCCA FCMA CGMA ACIS
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Sam My company has a 100% subsidiary which is in the

Customer Question

Hi Sam
My company has a 100% subsidiary which is in the same business.
When the subsidiary was set up my company paid the staff salaries for the first month as they didn't have a bank account yet.
Can this money be considered an expense in our accounts or does it have to be an intercompany debtor?
Thanks
James
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello James, I am Keith, one of the experts on Just Answer, and happy to help you with your question.
As for Corporation Tax (CT) purposes profits and losses can be moved up, down or sideways throughout company groups it really does not matter which way this transaction is done. However, as it was clearly a short term arrangement it would be better for all concerned were this transaction to be reversed and funds paid across so that it is reflected in the accounts of the appropriate company. That is the way that I would treat the position.
Making an inter company debtor is perfectly acceptable though and there are slightly less book keeping entries.
I do hope that I have shown you an appropriate way forward.
Customer: replied 2 years ago.

Hi Keith

Yes that is useful.

So just to confirm from a CT perspective, it would be okay to leave in my accounts, as the subsidiary doesn't have the funds to repay me. As if it was to be a debtor and i wrote it off as a bad debt, this is not recognised from a CT perspective as far as I'm aware. is that correct?

Thanks

Expert:  bigduckontax replied 2 years ago.
I cannot see the point of writing it off James as by leaving it in the accounts and manipulating the CT position, wages being allowed against profits in the profit and loss account, it would be to the company group's advantage.
Please be so kind as to rate me before you leave the Just Answer site.
Customer: replied 2 years ago.

Hi Keith

sorry last point and i will rate you.

I'm closing down my company so need to either expense it or write it off.

leaving as an expense lowers the corporation tax as calling it a creditor and writing off is not recognised for CT purposes as far as i thought, thus better as an expense.

thanks

james

Expert:  bigduckontax replied 2 years ago.
It is indeed. Instead of a close down have you not thought of selling it off on eBay James? You will even get a few quid for it. There are always a number of companies available there.
Here is an example, a bit out of your range I suspect!
http://www.ebay.co.uk/itm/FANTASTIC-TRAVEL-AGENCY-ONLINE-BUSINESS-FOR-SALE-GLD-TRAVEL-LIMITED-/271814292005?pt=LH_DefaultDomain_3&hash=item3f4964f225
bigduckontax and other Tax Specialists are ready to help you
Expert:  bigduckontax replied 2 years ago.
Thank you for your support.
Customer: replied 2 years ago.

Hi keith

Following on from the email thread regarding subsidiaries.

My company had a subsidiary, (75% stake). This sub went into insolvent liquidation last year.

The subsidiary was not in exactly the same business but there was cross over between the companies in terms of staff and money spent on marketing for the 2 companies.

my company paid some invoices on behalf of the subsidiary at the start of the subsidiaries trading.

Nothing was ever signed but this was supposed a loan.

Looking back now some of the invoices are in my companies name but i can't remember if they are related to my company or the subsidiary or a bit of both.

Can I include these as expenses in my company for CT purposes?

Again it lowers my CT if i do include as an expense as a written off loan cannot be recognised for CT purposes.

Thanks

james

Expert:  bigduckontax replied 2 years ago.

Yes James, but remember that as a Director any invoice must have your company's name on it as well as your own.

Thank you for your support.

bigduckontax and other Tax Specialists are ready to help you
Customer: replied 2 years ago.

no invoice has my personal name on it as a director, only the company name and trading address.

why is the director name needed?

I've never heard of that before.

so also to confirm, i can put through these invoices through my company as expenses?

thanks

james

Expert:  bigduckontax replied 2 years ago.
The director's name is ***** ***** but if it is there the company's name must be there also to preclude any suggestion that the invoice is the director's own, not the company's..
Yes you can.