My client is a sole director/shareholder of a limited company with a trading business. A few years ago, he had injected personal funds into the company to fund the purchase of a factory to be used in the company’s trade.

He now has an offer for his shares and wants to know the tax implications of waiving his loan, because the purchaser would like to buy the company without the outstanding loan.

Tax implications for the company

A waiver by the director of his loan, will be trading income for the company being a taxable trading loan relationship credit, because the waiver will be shown as an income in the financial statements of the company.