S419 tax, overdrawn DLA.

S419 tax, overdrawn DLA.

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I have inherited a client who has an overdrawn DLA of around £30k. They make a profit of £12-15k per year and take salary and dividends of around £10k the remainder pays CT. They cannot take less out as they need to live!

What options do you have if a client simply cannot reduce their DLA?

What are the implications of writing this loan off? I understand it is treated pretty much as a dividend but with NIC implications - is this correct?

Also can a loan be written off if the company contiunues to trade? If so what are the accounting entries?

Any other thoughts? I asume they could strike the company off and pay the S419 tax, then simply start again as a sole trader? Or another company?
Tiger

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By pelu naam
10th Oct 2008 09:46

OD .. how was it funded
You do not state how your client funded the overdrawn account. It may transpire that other issues may arise.

pn

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By bigdave1971
09th Oct 2008 16:06

Going bust?
Not sure I read this post the same as Jonny and I'm not jumping to the same conclusion just yet.

You said you inherited the client with an overdrawn DLA, was it overdrawn at the last year end and has S419 tax been paid in the past?

If the loan is historical then if it is not increasing then no further S419 tax will be due.

However if it all arose this year then you may have a problem to the tune of £7,500 plus benefits.

I'll let others give advice on writing off the loan.

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By User deleted
09th Oct 2008 13:31

Easy tiger
Sounds as though this client is bust.

Its not as easy as just paying the S419 tax, writing off, striking off and starting a newco.

Speak to an IP.

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