Conflicting advice from 2 Accountants
Discussion
Eric Mc said:
Clearence with lenders.
Split of sales proceeds on disposal of property at a later date.
Claims about shares of disposal proceeds.
Declarations with Companies House reagrding charges.
Personal guarantees (if they exist)
All sortedSplit of sales proceeds on disposal of property at a later date.
Claims about shares of disposal proceeds.
Declarations with Companies House reagrding charges.
Personal guarantees (if they exist)
They have employed a qualified mediator to draw up the agreement and each have their own solicitor. It's a totally clean break.
A new mortgage offer is in place for the one mortgaged property.
Edited to add
Thanks to everyone for their input.
Eric Mc said:
What I have listed are POTENTIAL problem areas rather than ACTUAL problem areas.
You seem to have an intimate knowledge of what this couple have discussed and agreed between themselves. Are you acting for them in a professional capacity?
No they are a couple who are long term friends of ours.You seem to have an intimate knowledge of what this couple have discussed and agreed between themselves. Are you acting for them in a professional capacity?
Really the woman is a friend of my wife's and when they split she has used us as a sounding board. She's a bit isolated so I've been helping with her life admin and my wife is being more of a supportive friend
Given the circumstances of the divorce they've done well to reach an amicable agreement (mostly because she hasn't gone for the maximum she could get ) and this was supposed to be one of the final meetings before sign off.
Edit.
What surprised me was the second accountant said
You can't do that
Rather than
If you do that then it's going to cost X.
Edited by TownIdiot on Friday 14th June 12:29
The second accountant may be correct. This falls within the loan relationship rules and the definition of connected companies is the relevant point.
If a loan is written off between connected companies, the income for the debtor is not taxable and the lender gets no tax deduction for its loss.
If they are not connected, the release is taxable for the debtor and tax deductible for the lender.
Connected companies are companies that are under the control of a person (NOT a person and their associates, such as a spouse).
In the OP’s scenario, the companies are owned exactly 50:50 between husband and wife - so no person controls either company.
That would mean that the companies are not connected and the loan waiver would be taxable income for the debtor and the creditor company would get a tax deduction for the amount waived.
It is definitely not straightforward
If a loan is written off between connected companies, the income for the debtor is not taxable and the lender gets no tax deduction for its loss.
If they are not connected, the release is taxable for the debtor and tax deductible for the lender.
Connected companies are companies that are under the control of a person (NOT a person and their associates, such as a spouse).
In the OP’s scenario, the companies are owned exactly 50:50 between husband and wife - so no person controls either company.
That would mean that the companies are not connected and the loan waiver would be taxable income for the debtor and the creditor company would get a tax deduction for the amount waived.
It is definitely not straightforward
A group would have been easier. There are other ways around it such as shareholders agreements giving one of the two individuals a presiding vote etc but that is not always palatable to the other individual
This is a very common situation with family companies and lots of tax advisors do not understand the definition of control in this context
This is a very common situation with family companies and lots of tax advisors do not understand the definition of control in this context
Thanks for the replies
I haven't heard any more on this recently. Will update the thread when it's settled.
Edited to add - previously I had found this on the .gov.uk website.
Control by more than one person
Following section 6(c) of the Interpretation Act 1978 we accept that the word ‘person’ can include ‘persons’. But such persons will only meet the requirements of the legislation if together they can secure that the company’s affairs are controlled in accordance with their wishes. Whether this exists will be a question of fact in all cases. For example, there could be an oral or written agreement always to vote together, or the intention could be implied by the relationship between the parties
I haven't heard any more on this recently. Will update the thread when it's settled.
Edited to add - previously I had found this on the .gov.uk website.
Control by more than one person
Following section 6(c) of the Interpretation Act 1978 we accept that the word ‘person’ can include ‘persons’. But such persons will only meet the requirements of the legislation if together they can secure that the company’s affairs are controlled in accordance with their wishes. Whether this exists will be a question of fact in all cases. For example, there could be an oral or written agreement always to vote together, or the intention could be implied by the relationship between the parties
Edited by TownIdiot on Sunday 23 June 10:12
TNJ said:
T
Connected companies are companies that are under the control of a person or persons (NOT a person and their associates, such as a spouse).
I think you have missed the bit I have added in bold.Connected companies are companies that are under the control of a person or persons (NOT a person and their associates, such as a spouse).
This makes them connected.
Gov.uk said:
The basic rule for deciding if 2 companies are 'connected' with each other is that either: one of them has control of the other. or, both are under the control of the same person or persons.
TNJ said:
Only if they have agreed to act together - which is why I referred to a shareholders agreement or similar
Just being 50:50 shareholders is not sufficient
It's not my gig but I'd be happy to rely on thisJust being 50:50 shareholders is not sufficient
"Whether this exists will be a question of fact in all cases. For example, there could be an oral or written agreement always to vote together, or the intention could be implied by the relationship between the parties"
They are married after all, and who doesn't always agree to what their wife says?
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