Capital contributions are common in a number of overseas jurisdictions but the concept is not specifically recognised under UK law. In the UK, a company is normally funded by way of debt or equity and a capital contribution is effectively a gift. The treatment of the payment will depend on the specific facts, but there is a risk it could be classed as taxable trading income. A UK resident payer is unlikely to be able to claim any deduction for the payment, nor can the payment form part of a shareholder’s base cost.
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