My client owns the entire share capital of two personal companies and is considering making a loan from one to the other. Are there any tax consequences in later waiving the loan?

There appear to be two issues to consider here, the companies’ tax position and that of your client as shareholder/director.

A loan between companies falls within the loan relationship regime and so a loan waiver will result in a credit in the borrowing company and debit.

As the two companies are connected companies within the meaning of section 466 Corporation Tax Act 2009 (CTA 2009), no relievable loan relationship debit or taxable credit arises – s354 and s358 CTA 2009 respectively.

The waiver of the loan will be passing value out of the lender company and so this will be a distribution under s1000 CTA 2010. Consequently, the shareholder will be taxable on this distribution under s385 ITTOIA 2005 being the only person entitled to such distributions.