Tax on Lost Money

Do I need to pay tax on lost money

Didn't find your answer?

Hi,

I lost some money (cash in hand) from my business. Do I pay corporation tax on that still?

 

Regards,

Mike

Replies (15)

Please login or register to join the discussion.

By mrme89
23rd Jul 2016 21:19

Before you get royally ribbed, you need to explain the situation in more detail.

Thanks (0)
Replying to mrme89:
avatar
By mike2016
23rd Jul 2016 21:51

There's not much more to it. I took some cash from my company account to buy some stuff for my business. But then I got distracted with other business concerns. When I finally got time to go and buy the stuff I can't remember where I put the cash - looked everywhere.

Thanks (0)
By mrme89
24th Jul 2016 07:50

This sounds very convenient.

The transaction will probably be a debit to your DLA.

Thanks (3)
By Marion Hayes
24th Jul 2016 11:39

If you lost the cash and didn't spend it on allowable expenses then mrme89 rightly says it will be treated as Directors drawings and yes you will still pay corporation tax on it as the Company never spent it.
What effect it will have on your personal tax bill will depend on the state of your Directors account in general

Thanks (1)
RLI
By lionofludesch
24th Jul 2016 12:01

Despite Basil's excellent analysis, expect questions from HMRC if they pick up on it.

Reporting it as lost to the peelers might help. Obviously, they'll be completely useless in terms of helping you find it but you create evidence.

Thanks (0)
By FoxAccountancyServices
24th Jul 2016 14:29

An excellent suggestion by Lion... report it, if you are going to risk claiming it as an expense, and in that statement, you will state you were out on a business trip, with the intent on using it for business.

It actually could have been stolen and you didn't realise it (a misplaced tenner that could have floated out whilst getting out your cash card is one thing, a "wad" is another.

I once "lost" my purse and, unbelievably to me at the time, my pocket had been picked. Spending on my card proved that! Luckily, I was getting on a bus, about the time it was picked, so quickly realised it had gone. I cancelled everything, but that was "just to be sure", and in all fairness I believed I had lost it. My faith in humanity!

You never know, but as Lion says, it might support your case if HMRC spot it, in the future.

As Basil says, if its substantial, you should be reporting it anyway. If its £100, the tax relief on it would be £20 and I doubt HMRC would even bother for that.

Whether you should claim it or not, is like a lot of things - a chance you take, in the hope it will fly, should you get an investigation. There are arguments for both sides. The only way you would get a definitive answer, is when taxman says no :))

Thanks (0)
RLI
By lionofludesch
24th Jul 2016 17:44

It would help if OPs were less economical with the facts and say whether they're talking about ten bob or ten grand.

Numbers often colour the advice.

Thanks (1)
By Ruddles
24th Jul 2016 20:28

I diagree entirely with Basil's analysis. Until such time as the cash is spent for business purposes, the cash belongs to the director (assuming the OP is in fact a director) and the correct entry is to debit DLA. If and when the cash is found and/or the relevant expenditure is incurred then the entry can be reversed to the relevant expense account. As for treating the 'loss' in the same way as employee defalcation, Basil may want to consider HMRC's views where the person responsible is a director etc.

Thanks (0)
Replying to Ruddles:
RLI
By lionofludesch
24th Jul 2016 20:36

Company cash belongs to the director ?

Do we now potentially need to pay a s455 charge on petty cash drawn from the bank ?

I've enough on explaining that companies and shareholders are different legal persons to clients.

I don't expect to have to do it to professionals.

Thanks (1)
Replying to lionofludesch:
By Ruddles
24th Jul 2016 21:34

Possession is 9/10ths of the law.

My point is that when the cash hits the director's pocket it is no longer the company's. And yes - in theory petty cash drawn by, and held by, the director without being spent could give rise to a s455 charge. But we're presumably talking here about amounts that are more than 'petty' (just guessing) and which have been 'misplaced' by the director. I'd be interested to read the Taxation article that Basil refers to, but HMRC's guidance is quite clear on loss etc by directors - I'd be equally interested to read the distinction between acting in good faith and not, to which he refers.

Thanks (0)
Replying to fawltybasil2575:
By Ruddles
24th Jul 2016 21:25

fawltybasil2575 wrote:

HMRC draw a distinction in effect between a director's (i) acting in good faith and (ii) acting duplicitously.

Link?

Thanks (0)
Replying to fawltybasil2575:
By Ruddles
24th Jul 2016 22:25

I draw a distinction between cash and other assets. Cash has peculiar characteristics and clearly if the stock is of no use or value to the director HMRC may be more willing to accept loss of stock - depending on the circumstances. Where cash is concerned, good luck in convincing HMRC that it should not be treated as a withdrawal against the DLA. But I will reserve final judgement until I've read the Taxation article.

Thanks (0)
Replying to Ruddles:
avatar
By User deleted
24th Jul 2016 22:38

Ruddles wrote:

fawltybasil2575 wrote:
HMRC draw a distinction in effect between a director's (i) acting in good faith and (ii) acting duplicitously.

Link?

I think the link is somewhere here BIM45255 (https://www.gov.uk/hmrc-internal-manuals/business-income-manual/bim45855). Again, I think the deductibility depends on whether a) it's a genuine case of business loss and b) the circumstances appear to be such that the claim appears to be genuine.
Edit: i.e. from HMRC perspective

Thanks (0)
Replying to fawltybasil2575:
avatar
By User deleted
25th Jul 2016 07:39

@Basil

Whilst I agree with the points put forward by yourself, the facts ["When I finally got time to go and buy the stuff I can't remember where I put the cash - looked everywhere"] haven't yet established that there was a loss. The OP doesn't remember what happened to the cash. Is that enough to satisfy the s.54 CTA/09 test? I think No.

Thanks (0)
RLI
By lionofludesch
25th Jul 2016 09:51

The facts are undeniably vague but we can only accept what we're told and, perhaps, request clarification.

Thanks (0)