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Is an intercompany loan removed from profit calcs before

Resolved Question:

Is an intercompany loan removed from profit calcs before corporation tax is calculated?
Submitted: 10 months ago.
Category: Tax
Expert:  bigduckontax replied 10 months ago.

Hello, I am Keith, one of the experts on Just Answer, and pleased to be able to help you with your question.

Inter company loans, their receipt, repayment or other adjustment thereto do not affect the profitability of a company at all unless interest is charged. In that case the interest element only of the loan increases or decreases the profit for Corporation Tax (CT) as appropriate.

I do hope that I have managed to clarify this matter for you.

Customer: replied 10 months ago.
a £45k sum that I had previously assumed would need to be a dividend, but am now hoping can be a company loan as will be used to start up a second new business, would not reduce my profit and therefore corporation tax liability for company number 1?
Customer: replied 10 months ago.
profit was £100k so will make a significant difference to £ I'm safeguarding to pay corporation tax for!
Expert:  bigduckontax replied 10 months ago.

Dividends do not affect the level of profit in the CT computation in any event. The use of that 45K to help start up a new business would not affect the company's profit one iota. A profit of 100K attracts CT at 20%, 20K tax due.

bigduckontax, Accountant
Category: Tax
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Experience: FCCA FCMA CGMA ACIS
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Expert:  bigduckontax replied 10 months ago.

Thank you for your support.

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