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Directors loan accounts

Shareholder write off!!

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Has anyone any experience of loans made to directors / shareholders being written off and Class 1 NIC avoided. The directors and shareholders are the same people.

I have held and minuted two shareholder meetings in feb 2017 & May 2017 writting off £35k each time. The sharholders called a meeting and wanted the loans written off as they claim the  payments were on account of dividends. The company has no reserves as a significant bad debt provion was included in the accounts due to a long legal dispute and essentially to wipe out any CT tax both years.

The idea behind the shareholder meeting and subsequent write off is that it is compensation for having to forfiet dividends due to the legal dispute. LOL

Clearly its in both the shareholders and companies interest too get rid of the loans by straddling two tax years (personally) and also mitigation the s455 and Class 1A for the company. Although obviously not in HMRC's best interest!!!

 

 

Replies (33)

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By WhichTyler
29th Jun 2017 15:45

So have they declared a dividend or not?

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Portia profile image
By Portia Nina Levin
29th Jun 2017 15:50

LOL. WTF? JOYC.

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Replying to Portia Nina Levin:
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By practiceperson
29th Jun 2017 16:28

JOYC...?..thats got me intrigued, few ideas spring to mind.

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Replying to practiceperson:
Portia profile image
By Portia Nina Levin
29th Jun 2017 16:52

It's a variant of JO - jog on!

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Replying to Portia Nina Levin:
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By legerman
30th Jun 2017 12:20

Portia Nina Levin wrote:

It's a variant of JO - jog on!

It worries me that I knew what it meant on first reading, even though I've not see that acronym before.

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Replying to Portia Nina Levin:
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By bumpdinkwhallop
29th Jun 2017 23:36

Portia Nina Levin wrote:

LOL. WTF? JOYC.


FFS............. V

Stewart Fraser Ltd v HMRC (2011)

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By Ruddles
30th Jun 2017 09:20

In my experience, a more appropriate question would be:

"Has anyone any experience of loans made to directors / shareholders being written off and Class 1 NIC charged?"

I have yet to come across a single instance of HMRC trying to charge NI on the release of a director/shareholder loan. Of course, it may simply be that to date they haven't been arsed to investigate any of such clients, rather than accepting that no charge is due.

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Replying to Ruddles:
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By bumpdinkwhallop
30th Jun 2017 09:36

Iv found a number. Stewart Fraser Ltd v HMRC (2011) being one with comments by the FTT making interesting reading hence the idea of the original post.

There is also a cross enquiry compliance review into its 19 month so pretty certain there will be a challenge.

Thanks for comment

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Replying to bumpdinkwhallop:
By Ruddles
30th Jun 2017 09:48

I was talking about my own experience, which I suspect - though may well be wrong - is very similar to that of most respondents here. You did ask about others' experience.

Now - if you were to have asked "Has anyone looked for, and found, or come across, any cases where HMRC have successfully charged NI on loan write-offs?" ...

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Replying to Ruddles:
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By bumpdinkwhallop
30th Jun 2017 09:52

"I have yet to come across a single instance of HMRC trying to charge NI on the release of a director/shareholder loan."

Take it your not very busy today?

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Replying to bumpdinkwhallop:
By Ruddles
30th Jun 2017 10:00

What part of "my own experience" is proving so difficult to understand?

Going back to your original question - "Has anyone any experience of loans made to directors / shareholders being written off and Class 1 NIC avoided?" I suspect that every respondent on this forum has experience of loans made to directors/shareholders being written off and Class 1 NIC avoided (or at least not charged).

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Replying to Ruddles:
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By bumpdinkwhallop
30th Jun 2017 10:17

Just because a taxpayer sticks a family holiday to Florida on his SA return as travel & subsistence and it doesn't get selected for enquiry doesn't make it correct!

The amount of case law would suggest that HMRC would certainly challenge and be successful in arguing it was earnings liable to class 1 NIC when a directors loan is written off.

The question was in relation to company directors who are also shareholders. The shareholder at a shareholders meeting write the loan off The reason for the write off is to compensate the shareholders for a lack of a dividend!!

The reason for the question was due to being made aware of a FTT case and I wanted to see if anyone else had direct experience of writing off a loan through a shareholders meetings and not a directors meeting, the write off being challenged and the outcome being "not earnings"

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Replying to bumpdinkwhallop:
By Ruddles
30th Jun 2017 10:36

I never said that the treatment in my clients' cases was "correct" - did you miss the part where I said the outcome may have been as a result of laziness on HMRC's part?

I can (now) understand the reason for your question, but given that reason you ought to have thought more careully about your question. Simply asking whether anyone has experience of NI not being charged is not the same as asking whether anyone has successfully defeated an HMRC challenge, having in mind specific case law (which you also failed to mention in your question). If you want proper answers, ask proper questions.

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Replying to Ruddles:
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By bumpdinkwhallop
30th Jun 2017 10:44

You put the YC into JOYC

V

I'm sure you would be able to recognise those two fingers pointing at you!

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Replying to bumpdinkwhallop:
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By Portia Nina Levin
30th Jun 2017 11:01

No you're confused, Thrush.

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Replying to Portia Nina Levin:
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By bumpdinkwhallop
30th Jun 2017 11:12

You.......C

We know

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Replying to bumpdinkwhallop:
By Ruddles
30th Jun 2017 11:03

Not really, they seem to be pointing straight up. Are you trying to claim some form of victory?

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Richard Hattersley
By Richard Hattersley
30th Jun 2017 11:19

I think this is a good place to remind everyone that this is a professional site - let's keep the conversation civil.

To ensure the discussion stays on topic, some comments in this thread have been moderated.

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Replying to Richard Hattersley:
By Ruddles
30th Jun 2017 12:27

And you think that the comments posted at 9:44 and 10:12 are more acceptable than the comment of mine that was removed?

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Replying to Ruddles:
By Ruddles
30th Jun 2017 17:00

Hmmm ... so amusing graphics are considered to be offensive, but calling someone a "C..." is OK.

At least we know what is and is not acceptable.

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Replying to Ruddles:
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By Portia Nina Levin
30th Jun 2017 14:14

9:44 and 10:12? Have you got your timings right?

I actually called the OP an irritating c*** earlier, and seem to have got away with it!

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Replying to Portia Nina Levin:
By Ruddles
30th Jun 2017 14:29

Ah yes but at that time it wasn't clear what the "C" meant!

It's pretty clear what the OP meant, though - at 09:44 and 10:12 (GMT)

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Replying to Ruddles:
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By Portia Nina Levin
30th Jun 2017 14:39

Ah, but the "C" didn't have an "I" with it.

My IC was at 10:01 GMT (11:01 BST).

Do you see times in GMT then? I'm getting a BST version.

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Replying to Portia Nina Levin:
By Ruddles
30th Jun 2017 16:21

Probably because my time setting today on AWeb is for Abidjan :)

Tomorrow I think I'll go for Buenos Aires.

EDIT - no Buenos Aires on the list, so I think I'll head off to Pitcairn Island instead.

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Replying to Ruddles:
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By bumpdinkwhallop
30th Jun 2017 16:25

Standard setting for halfwits I suppose

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Replying to bumpdinkwhallop:
By Ruddles
30th Jun 2017 17:51

Better a halfwit than a complete and utter f**kwit

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Replying to Portia Nina Levin:
By Ruddles
30th Jun 2017 16:25

Portia Nina Levin wrote:

Ah, but the "C" didn't have an "I" with it.

My IC was at 10:01 GMT (11:01 BST).

Do you see times in GMT then? I'm getting a BST version.


Your 10:01/11:01 post - right over my head, and I suspect that of the OP. Inspired.
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Replying to Ruddles:
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By bumpdinkwhallop
30th Jun 2017 16:31

Makes perfect sense to me

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Replying to bumpdinkwhallop:
By mrme89
02nd Jul 2017 10:29
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Replying to Ruddles:
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By Portia Nina Levin
30th Jun 2017 17:28

Thrush, it's an irritating c***.

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Replying to Portia Nina Levin:
By Ruddles
30th Jun 2017 20:19

Yep I'd already worked it out :)

At least you've left Bumpkin in no doubt.

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By Tax Dragon
30th Jun 2017 17:44

This one wins the technical-discussion-of-the-day award.

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Tom Herbert
By Tom Herbert
02nd Jul 2017 20:09

Thread closed

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