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Assets not owned by a company

I have a client who has properties which were sold to the directors about a year ago. This was properly accounted for and mortgages were secured personally.

However, the client now wants to show the properties and the mortgages on the properties in the Limited Company with any rental income shown in the limited company accounts. The reason is that he has an overdrawn directors loan account and this equity would reduce the loan.

He says that he has done this with previous companies and that he is holding the assets as a 'fiduciary' for the Limited Company.

Is this possible?
Colin Higginson

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01st Nov 2007 09:15

Thank you.
Thanks for your replies. Your points are exactly the points I had thought of. Unfortunately the client says he has done it before (we were not his accountnats then).

I have done everything I can for him, and he is the only one who has heard of this arrangement. At least I can say, hand on heart, that I have pursued every avenue to help him.

Thanks again.

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31st Oct 2007 17:42

Window dressing
You said that the properties were sold to him. He must have taken the properties into his hands and so they are now in his name. In what respect is he holding them in a ficuciary capacity as bare trustee? Did he tell the bank or building society when he borrowed the money? Do you want HMRC to ask questions and then wonder what other accounts you have fudged?

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31st Oct 2007 18:48

Money laundering
Could the mortgage lender enforce repayment from the company? No - so the mortgage loan cannot be included in the company's balance sheet as a liability.

Could the company give good title on the sale of the properties? No, because it has already sold them to someone else - so the properties cannot be included in the company's balance sheet as assets.

If you were to acquiesce to this proposal, it is worse than window dressing. You are contributing to the process of defrauding the Revenue by artificially reducing the balance on which s.419 tax is payable. Report yourself to SOCA.

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