LAM07140 | Trade profits: Capital contributions

A capital contribution can be made to introduce new capital into a company without the payer taking shares in return or creating a debt. If a payment is made to a company carrying out long-term insurance business in order that the money may be used in the recipient’s business, to supplement trading or other business receipts and to enable the recipient to carry on business, or otherwise to preserve and maintain trading stability and solvency, then depending on the specific facts surrounding the payment, it may be a taxable trading receipt. This approach follows the normal rules applicable to any business and further guidance can be found at BIM41810.