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Director's loan account in liquidation

Are there any implications on an irrecoverable overdrawn director's loan account

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I'm considering what the tax implications are, if any, for a director where a company goes into liquidation and there is an overdrawn director's loan account which is irrecoverable from the director?    Presumably the loan is not being formally forgiven by the company and the normal course of accounting for a loan write-off through the company will not be available.   

Are there any personal implications for the director?  Should anythig be entered on their personal tax return.

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10th Jan 2019 14:47

Irrecoverable ?

For what reason ? Bankruptcy ?

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By spuddle
to lionofludesch
10th Jan 2019 14:54

Simply very little assets - certainly no cash funds - minimal equity in own home, and the liquidators have indicated they will take a "commercial view" to any recovery. I guess they are under pressure to conclude any liquidation in a reasonable timescale and there is probably no point in pursuing a debtor to bankruptcy if there is no reasonable chance of actually recovering monies.

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11th Jan 2019 09:32

If the debtor can prove they have no ability to pay the Liquidator may conclude there is no available debt to collect and close the Liquidation.

Alternatively the Liquidator can take recovery action which might include Bankrupting the Director.

Really depends on the circumstances and whether the Lqr is in funds.

The Lqr also has the powers to pursue other Directors for allowing the debt to form and/or pursuing any preferential repayments made.

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By spuddle
to Insolvency Practitioner
11th Jan 2019 12:18

Thanks but I was looking at the personal tax position of the director.

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By spuddle
11th Jan 2019 12:20

I have found this link which has some views on the situation. I'm still not sure about the loan being waived or forgiven if it is just being recognised by the liquidator as unrecoverable. https://www.accountingweb.co.uk/any-answers/treatment-of-s455-for-bankru...

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