A client company commenced with 4 shareholder / directors all of whom lent £5k to the company at day 1.
Things didn't go to plan and further small loans were made. Eventually two of the individuals decided they didn't want to make any further input and both resigned and transfered their shares to the remaining shareholders.
A couple of years on and one of the remaining directors has asked me to write off the loans outstanding to the two previous directors as "they have said they won't be chasing payment".
I'm not comfortable doing that without something in writing from the parties involved.
My questions:
1 I assume a contract of sorts wil be required with consideration each way, perhaps agreeing to write off for a nominal sum being paid immediately?
2 Are the funds just credited to reserves as tax free income? It's an FRS105 company so there will be no notes in the accounts.
Thanks for any responses
Replies (10)
Please login or register to join the discussion.
I agree you need confirmation from the creditors, not just the unsupported word of the director of the debtor company.
I was hoping the conversation would extend to what would have been the position if the two ex shareholders/ directors were still directors/shareholders, or if the question re w/off loan balances had been addressed before they ceased to have a connection with the company.
Still, someone may yet still decide to come on and quote chapter and verse.
I don’t believe that the status of the creditors is of any relevance to the tax analysis.
As a rule of thumb, you can only write off what other people owe you - not what you owe them.
I may mean law rather than thumb. I've had too much gin today to be sure.