I have a UK client who has a relationship with another UK company that lets properties to businesses in Italy. My client invoices the other company for Services, which can be large chunks of money (£20k+). He didn’t receive payment for his 1st invoice to the other company, but has done for subsequent invoices; he now wants to turn the first invoice into a loan – I’ve asked for a loan agreement to make sure this is kosher. Are there implications for converting the Debtor into a loan on the Balance Sheet that I should be concerned about? Basic bookkeeping entries? Dr ST or LT Loan/Cr Sales? I’m planning to remind the client that converting to a loan doesn't change his liability for corporation tax (no VAT because he wasn’t registered for VAT (or required to be registered) at that time) on the revenue.
Thanks in advance for your help