Share this content

Loans to company to be written off

Directors waiving their loan accounts

Didn't find your answer?

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.

By johngroganjga
21st Aug 2018 13:39

I agree you need confirmation from the creditors, not just the unsupported word of the director of the debtor company.

Thanks (2)
By johngroganjga
21st Aug 2018 14:04

Duplicate

Thanks (0)
By Ruddles
21st Aug 2018 14:18

And the release, if it happens, will give rise to a taxable credit.

Thanks (1)
paddle steamer
By DJKL
21st Aug 2018 14:20

Watched.

Thanks (0)
Replying to DJKL:
avatar
By andy.partridge
21st Aug 2018 15:04

'Every breath you take, every move you make . . . '

Thanks (0)
Replying to andy.partridge:
paddle steamer
By DJKL
21st Aug 2018 15:16

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.

Thanks (0)
Replying to DJKL:
By Ruddles
21st Aug 2018 15:48

I don’t believe that the status of the creditors is of any relevance to the tax analysis.

Thanks (0)
By pushtheriver
21st Aug 2018 14:52

Thank you for the replies. And Ruddle thank you. I now agree it would be taxable as other income

Thanks (0)
Replying to pushtheriver:
By Ruddles
21st Aug 2018 15:47

Not as other income but as a loan relationship credit.

Thanks (0)
avatar
By Tax Dragon
21st Aug 2018 18:04

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.

Thanks (0)
Share this content