I have a client which when i inherited it from another firm which has Land & Buildings of £1.4m and a directors loan account (credit) of £1.7m on the balance sheet.
The company has been purchased by new owners for £2.2m. This was for the shares and business and paid for by the new owners to the old owner directly. However, I am left on the accounts with a directors loan account of £1.7m which no longer exists to the original owner. How do I deal with this? The only answer I could think of is transferring this to reserves. However, I am worried if there are any tax implications if this goes to distributable reserves and if this goes to undistributable reserves what will happen if the company is wound-up/liquidated.
Or should this stay as a loan due to the new directors?
Never had to deal with this before. Help would be much appreciated