Can one Company pay CT bill of another Company?

N33D_H3LP

Hi there,

Would really appreciate some advice.

I have two companies. One of the companies has a Corporation Tax bill (15k) to pay but doesn't have sufficient funds.

I want to make the payment from my other separate company. I know this is not ideal but is it likely to cause many future problems going forward?

Otherwise, should I just pay the money from this company into one of my bank accounts and then pay the bill from that account? I just want to make the payment without making it seem like it's a payment of income?

Thanks

anselld

Not a problem so long as the "loan" is properly accounted for in both sets of accounts.

00ec25

purely from a cash perspective yes you can move the money from one company to another

however, as both companies are under your control both companies need to record the movement as a non trading loan and that will have corporation tax repercussions for both if the loan is not repaid and is instead written off

make sure your accountant knows what you are doing as it will need to be recorded correctly

N33D_H3LP

00ec25 wrote: »

purely from a cash perspective yes you can move the money from one company to another

however, as both companies are under your control both companies need to record the movement as a non trading loan and that will have corporation tax repercussions for both if the loan is not repaid and is instead written off

make sure your accountant knows what you are doing as it will need to be recorded correctly

Thanks.

Ideally I want to pay the bill and close the company down as it hasn't traded since March but it would appear that would be an issue?

molerat

Can of worms I think. Why has the company not got the money to pay the tax ?

N33D_H3LP

molerat wrote: »

Can of worms I think. Why has the company not got the money to pay the tax ?

Why is it so hot today?

Pennywise

N33D_H3LP wrote: »

Thanks.

Ideally I want to pay the bill and close the company down as it hasn't traded since March but it would appear that would be an issue?

Yes it's an issue. That's because it's not a commercial transaction. It's basically you drawing money out of your second company, and choosing to use it to pay the CT of your first company. So, you'll personally end up with a tax (and maybe NIC) bill for drawing money out of it. The only viable way would be to create a group company structure by transferring shares so one company "owns" the other, rather than you personally owning both separately. Once you have a group, you can freely transfer funds. But that's going to be costly in terms of professional fees to get it right, so may not be worth it.

N33D_H3LP

Pennywise wrote: »

Yes it's an issue. That's because it's not a commercial transaction. It's basically you drawing money out of your second company, and choosing to use it to pay the CT of your first company. So, you'll personally end up with a tax (and maybe NIC) bill for drawing money out of it. The only viable way would be to create a group company structure by transferring shares so one company "owns" the other, rather than you personally owning both separately. Once you have a group, you can freely transfer funds. But that's going to be costly in terms of professional fees to get it right, so may not be worth it.

Thanks Pennywise,

Is this something that can be done retrospectively as I really have to get this bill paid tomorrow?

chrismac1

If the tax is due on 31 May, I suggest just paying it from where you have funds. Then let your accountant sort out the corporation tax return and so forth.

Wayne_O_Mac

Does the company have any assets that you wouldn't want liquidators or creditors to get their hands on? Because if you're closing it anyway and the company doesn't have any money, what's to stop you liquidating it with HMRC as a creditor?