the english company has £372k in assets and £671j in liabilities of which £623k is owed to an australian company and a usa company both also 100% owned by the foreign company. the english company is essentially insolvent. a bankruptcy averts the cancellation of debt income, but is their income to the holding(parent) company, and can the usa & aus companies write-off the receivables on their books?
not in liquidation. still operating
what is the english law pertaining to related company ownership: ifthe u.k. corp declares bankruptcy, what happens to the debt owed the related companies? the 10% can be paid to the outside creditors. must they be reported as dividends or income by the u.k. corp under u.k. tax law?
are you saying there is no dividend to the other related corporations for the difference between the bankruptcy value received, and the amount of the receivable?
Our tax accountant has stated that the stockholders of u.k. corp. owe the usa related corp the receivable, and would have to declare a dividend in the u.s. corp, thus causing income tax liability to themselves, and using the dividend to pay the receivables owed by the u.k. corp.
If all 3 companies were u.k. companies, what would be the tax ramifications. debtor company files(can they?) bankruptcy, can the receivable company write off the debt against income, or must the parent company(owning both corps.) transfer the debt to their books, and then declare a dividend in the receivable company, in order to liquidate the debt?
kindly respond to my question assuming all 3 companies are in u.k., are there any dividends or cancellation of debt income recognized by any of the 3 companies?
in other words, if the debtor company files chap 11, not recognizing cancellation of debt income, nor would the owner-parent, and the receivable-related company can write-off the uncollected receivables as bad debt expense on their u.k. tax return. thus no dividend income for any company, but the receivable company reduces income in the current yr by the bad debt write-off.
did not receive an answer to my questions.
You did not address the related company question. Of course your generalized answer is true. I'm inquiring whether it's applicable to related company debt. Can a related company write-off the receivables to another related company, when both are fully-owned by a 3rd corporation. Please answer this specific question. In actuality the 3 are from different countries, u.k., aus, and usa, but since you only know u.k. law, I then changed them to u.k. countries. Do you understand my question now? Does common ownership have any effect or consequence on whether the debtor company, can file bankruptcy, and not have to recognize income on the payables it owes a related company, whereas both are fully owned by a 3rd company. What does u.k. law permit or mandate in this case?
you haven't answered my specific question, just given generalities. I'm reversing my payment.
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