I have a client who has been investigated by HMRC for the accounting periods 2012/13 to 2017/18. I took over his accounts in 2018/19 and had to deal with the investigation after the previous accountant refused to assist. In 2012/13 the company bought an asset from the business bank account. The accountant claimed AIA in full and depreciated the full amount of the cost rather than depreciating the asset in line with the NBV. Therefore when the asset was sold in 2013/14, the proceeds of the sale were paid straight in to the Directors personal bank account. HMRC have investigated and advised the Director to pay back the £25k from the proceeds of the sale in to the business bank account and charged him the £5000 Corporation Tax which he has now paid. I have included the £5000 Corporation tax paid as a Corporation Tax expense but don't know how to account for the £25000 re-introduction of the funds that the Director has paid in to the business bank account. If I include it as a gain on disposal (my initial thought), the Corporation Tax will be charged again in this tax year but he has already paid it through the assessment. I just don't know what to do for this and any help or advice would be greatly appreciated.
2nd Jul 2020
How do I record this entry in bookkeeping?
A director has reintroduced funds from the sale of an asset not recorded in a previous year
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