Holding company and overdrawn DLA

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Company A loaned director £160,000 to purchase a property, S455 tax was paid on this loan.

Director has now transferred ownership of the property to Company B (which is a holding company)

My question is can the credit balance on the Director's current account in Company B transferred to Company A to write off the overdrawn DLA?

Replies (8)

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paddle steamer
By DJKL
20th Feb 2017 14:36

When Director sold /disposed property to Company B what did he agree re price?

Does company B owe director the purchases price, or a partial balance re same?

Go back to the legal agreement re sale/disposal to Company B and see what was agreed re the deal.

In addition, re his personal CGT liability (if any), what was market value of the property when he sold to Company B presuming he is connected to Company B?

What did he/ Company B do about Stamp Duty Land Tax re sale/disposal to Company B?

In essence until the deal is examined you cannot really say what if any liability company B has to the director, all you know is that he owes Company A £160,000 and there is a potential/actual debtor within Company A re s455 tax of likely £40,000 or more.

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Replying to DJKL:
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By Amyrlferris
20th Feb 2017 15:10

The property was sold to Company B at £163,000

Company B owes the whole purchase price

Yes he is a director and shareholder of Company B and no CGT liability arises from this sale

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Replying to Amyrlferris:
paddle steamer
By DJKL
20th Feb 2017 15:20

Edited as got numbers wrong:

Re your accounts entries:

So Director owes £160k to Company A and is owed £163k by company B.

So if Company A lends £163k to Company B it can then use this loan to repay £163k to director and he can then use these funds to repay £160k to Company A.

Company B then owes £163k to Company A.

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By Amyrlferris
20th Feb 2017 15:30

Thank you for your reply.

What would happen if Company A didn't physically have £163,000 to loan to Company B?

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Replying to Amyrlferris:
paddle steamer
By DJKL
20th Feb 2017 15:38

Well I always prefer a bank trail, so you could always say take £10k and circulate it 16 times!!!!!

Other than that you are into selling the debt.

Director transfers £160k of the debt owed by Company B to him to Company A in satisfaction of his overdrawn loan account with Company A.

I much prefer structures where physical cash moves and there is evidence within the bank statements of the respective parties; avoids evidence issues later.

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Replying to Amyrlferris:
By Tim Vane
20th Feb 2017 15:42

Company A can borrow the money from the director. Sounds like Ouroboros Holdings Limited.

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By Amyrlferris
20th Feb 2017 15:40

Great, thank you

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By johngroganjga
20th Feb 2017 19:11

Yes - with the agreement of all the parties affected of course it can.

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