I am preparing a set of company accounts and brought forward in the accounts is an amount of £1030 in "other debtors" where the director of the company made a loan using company funds to his friend who is not connected to the company. He tells me that the friend has done a runner and he never expects to receive the £1030 so it should be written off. I have written it off to bad debts, but my question is:
Is that £1030 allowable for corporation tax purposes, or should it be written back in the Corporation Tax computation?
Thanks
Richard
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I agree directors loan
If the company is a close company then the write off is a taxable as distribution on the director, also NIC'able on both employee and employer.
Finally, no deduction for CT.
NIC
also NIC'able on both employee and employer.
Hello there
I've never come across this situation before so for my own education - if the loan write-off is treated as a dividend why would there be employer and employee NIC payable?
Many thanks
.
thats a touchy subject.
when is a dividend subject to NIC?.. have a read at the recent PA Holdings case.
however, back in the world of the SME client it is NICable because HMRC say so. There is no legal grounding that I am aware of that specifically deems it to be NICable.
back on the main point though...why are we so keen to tag the director with this loan without further info.
Was the "friend" a participator or an associate of a participator?
I am not saying that the company will get a deduction for the loan debit (unallowable purpose and all that)...
Company loan?
The loan was to the Director, who forwarded it to his friend, or (if there's a written loan agreement signed by the friend) direct to the friend. Either way it's a loan, not a dividend, and NICs don't come into it unless it's written off.