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Splitting a directors loan account

Hi everyone

Here's one for you.....

Property investment company, owned by one family.  Mum & Dad are majority shareholders and are looking to exit. 

Mum & Dad have a large Director Loan Account (DLA) +£700k, and it is unlikely that this will be fully repaid.  The balance arose because of Mum & Dad selling property to the company, whilst not receiving payment from the company.  As far as we can tell, having just taken this client over, all properties were sold at arms' length, using 3rd party valuations etc.

All of which leaves our client with a large asset for IHT purposes, which is extremely unlikely to be repaid by the company.  Could Mum & Dad gift part of their DLA to the other directors / their kids?  Am I right in assuming this would be a P.E.T.?  Are there any other issues I've missed?

We can assume that Mum & Dad will be happy to gift part/all of their DLA balance.

Thanks in advance!

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02nd Mar 2012 14:53

PET

I cannot see any particular problems with an assignment of part of their DLA. As you say, it would be a PET for IHT purposes.

There may be a better way but this would require knowing a lot more about the circumstances.

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12th Mar 2012 09:53

To start the process first of all you should decide the loan amount on which further things are depending. There are different processes for different loan providers. But we should be that much capable to understand which we have to choose from them.

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