As a Solicitor, it is not uncommon for me to hear from the FD or Financial Controller of a group of companies that it is not usual practise for them to formalise their intra group lending arrangements.
Though standard terms would usually apply, ensuring that intra group lending was based on a bona fide commercial basis, very often, and even with large PLCs there is not the sort of documentation or evidence of a loan available in the same way you would expect with say an external loan relationship. In fact it is common to find little more than a board minute ( if you are lucky) and some entries on the intra group balance statements.
The recent case of MJP Media Services Limited v HMRC (Upper Tribunal - 2nd September 2011) has highlighted that unless proper evidentiary documentation is kept, a court is unlikely to agree that a "lending relationship" has taken place for the purposes of the loan relationshp rules and this could have a very negative effect on the ability to claim deductions for corporate tax purposes.
http://www.tribunals.gov.uk/financeandtax/Documents/decisions/MJPMediaServicesLtd_v_HMRC.pdf
Furthermore, I can see that this evidentiary burden could have a negative impact wherever a company is expecting the existence of a loan to reduce a tax liability of whatever nature for the company.
Specifically, in the MJP case, the company had not retained copies of bank statements showing that payments had been made and the tribunal was "instead faced with a patchwork of accounting entries and partial documentation".
This case therefore serves as a warning for companies who manage their intra group "loans" in a very informal way. What HMRC and the courts will be expecting to see is a more formal agreement and actual evidence of loan payments being physically made into and from the banks accounts belonging to the relevant companies.
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