I have a limited company client that have made a lot of losses and he wants to close the company down. He now has a business in his own name which is very profitable, same business as limited company, and he wants to know how he can use these losses to reduce his current taxable profits. He doesn't want to use his old limited company because the name brings back bad memories and because of the tie up with another company that was trading fraudulently. As anyone any ideas of how to extract these losses so that he can use them against his current profitable business in the same trade?
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Still no
As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.
What!!
Your client's only possible "bad debt" would be his DLA, and you can't carry that across. Surely he wasn't trading with the Company?
Of course
How silly of me to miss this! Now just remind me, what were you actually asking, or have you only just remembered this simple solution yourself?
His Turnover is 25 million!
It will not show up to HMRC because his turnover is £25 million. These will be the only accounts as a sole proprietor as he has formed another limited company.
In one of you other posts you have intimated that you tend to deal with smaller companies and tax return type clients and you'd given up your ACCA and AAT memberships. What on earth made you decide to deal with a client of this size? Its not beyond the realms of possibility that a client this size would need other services and capabilities which you are not placed to deliver. Whilst you say he's temporarily acting as a sole trade and I appreciate we don't know the balance sheet positions or employee numbers there must be a high chance he'd be breaching audit thresholds at some point.
Really?
Let us for the moment ignore the rewriting of history that this would require, or whether amending the company accounts to show as receivable a debt known to be bad is false accounting.but I don't think my client is going to be too happy. The only thing I can do is to refile the final company accounts and carrying the bad debt through to his new sole proprietor business.As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.
How is the sole trader to pay for this £500,000 asset you are now proposing to transfer to them? Legal separation of company and individuals remember.
Not even close
The following posting doesn't even come close to answering my question (only dealing with how the asset gets into the sole trader, not out of the limited company. Just "transferring out" the balance sheet is not an answer in isolation, as you would know if you were a professional accountant) it will answer your question.
However, since the following post also contains a sentence implying you are happy to defraud HMRC (on the grounds your client's turnover is too big for them to notice) then there seems little point in pursuing the correct treatment a professional would apply.
You might want to consider filing a MLR report on both this client and yourself if you go ahead with this.
And thrice nay!
As an accountant you should know this. It is a pretty basic feature of the company being a separate legal entity from the individuals owning/running it.
Exactly - it's why he's running a profitable Company now rather than hauling himself out of bankruptcy, so he should be counting his blessings.
What I would do
would be for your client's company to invoice the losses, may be as Work in progress, to his sole proprietor business. That gets rid of the limited company losses and then offset the WIP against the sales of his nrew business. Problem solved. Just one more problem and that is that the company probably should have been audited so you may have to ask an auditor to put the change, through limited company accounts, as it appears you are not qualified to do so.