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Accounting for CVA writeoff

Accounting for CVA writeoff

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We have a client in a CVA, substantial creditors and a likelihood of paying them around 40p in the £. How do we account for the amount that gets written off at the end of the CVA? Is it just an exceptional credit to P & L? I assume it must be taxable, as it represents a writeback of costs charged in previous years.

While this all makes sense, it is going to create a nasty problem for the company. They have liquidity problems - hence the CVA - and as a reward they are going to be hit with a big CT bill on a huge paper profit that won't be reflected in cash income. Unless they start planning for this now, I fear they may survive the CVA and then be pushed into liquidation when they come out of it!! Unfortunately they can't start saving towards it as surplus profits have to be paid into the CVA.

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By Anonymous
31st Jul 2009 19:21

Maybe
the IP should have allowed for the additional CT when advising on the CVA. Inflation may take care of the problem.

However why do you think that the write off is delayed?

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01st Aug 2009 23:39

CVA's
You need to write back the surplus credit as an exceptional item as you say. This write off is NOT assessable to CT - look at the loan relationship rules and FA96.

The CVA can be a useful tool, however is often used as a ruse by unscrupulous IP's as a way of securing supervisors remuneration. The CVA inevitably fails, then the supervisor petitions to wind-up and sells the assets back to director as liquidator. Hey presto, double fees.

You can exit the CVA into a prepack Administration via a different IP, which is often a better course of action as any asset sale can be made on deferred terms. Alternatively instruct the supervisor to fail the arrangement.

If you would like to discuss this feel free to get in touch!

Regards

Fellowcraft

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23rd Feb 2015 20:14

write back of CVA credit in a LLP

Hi

I have a LLP client who is in a CVA

Is the potential credit non taxable too ?

Any help would be much appreciated

 

 

 

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