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Overdrawn Loan Account

My client transferred assest into his company from a partnership and the valuations were questioned by HMRC.

Monies were withdrawn from the company by the director against this transferred amount.

The valuation has now been accepted a high and subsequently reduced.

My question is what is the effective date of the DLA being classed as overdrawn, is it:

1. The valuation should be amended on day one and the overdrawn account occurs after the first withdrawal with subsequent wihdrawals etc etc.

2. The valuation should be amended in the accounts year when the agreement was reached with HMRC and the DLA becomes overdrawn in that year.

Assume for now that the cleared within nine months of the year end doesnt apply to the earlier period but could for the current period.


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24th Jan 2013 15:58

you/your clients discretion

as the accounts are your client's accounts the transfer would either be valued at the date it was deemed to occur-which is the natural date- so the loan account can be restated at that date. restating the loan account may require restating the assets as well.

of course if that creates an overdrawn loan balance then you have to consider how much later the assets should be restated to the HMRc agreed value rather than the value originally in the accounst.

this process by hmrc may or may not have led to a s419 charge by hmrc.

if it has generated a charge already then there is no further s419 tax to pay other than that already required by HMRC.

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