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Overdrawn directors loan account

Overdrawn Directors Loan account

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I have an overdrawn directors loan account question.  The loan is significantly overdrawn.  

Can the director introduce a private asset eg. a very valuable oil painting, to the company, which is worth more than the loan in value but is not related to the company trading activities.    Then start to repay the loan account gradually and when repaid take back the asset?  Would HMRC find this acceptable or would it be seen as avoiding tax and so better to just declare and pay.

Posting as anonymous has this treatment has been suggested to me but it doens't feel right.

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By The Dullard
11th Nov 2019 17:49

It's perfectly fine for a participator to favour paying CGT personally, and then having an asset benefit, over the company paying s 455. I assume the director is a participator and s 455 is your concern?

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Replying to The Dullard:
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By Tax Dragon
12th Nov 2019 07:30

And VAT.

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Replying to Tax Dragon:
Psycho
By Wilson Philips
12th Nov 2019 08:46

VAT???

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Replying to Wilson Philips:
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By Tax Dragon
12th Nov 2019 09:19

I'm assuming the company is registered and (absent information) that the artwork is not Group 11.

Of course I could be wrong, but we're all making assumptions here, aren't we?

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Replying to Tax Dragon:
Psycho
By Wilson Philips
12th Nov 2019 10:14

There is also an assumption that the painting must be treated as a business asset.

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Replying to Wilson Philips:
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By Tax Dragon
12th Nov 2019 10:37

Companies don't tend to have private assets... but we seem to have slipped into direct tax terminology, for some reason.

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Replying to The Dullard:
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By Adam12345
12th Nov 2019 08:30

and a possible future benefit-in-kind.

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By Tim Vane
11th Nov 2019 19:42

HMRC probably won’t mind a jot if it swells their coffers.

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By WhichTyler
11th Nov 2019 23:21

Hmmm. Is there a reason they don't sell (or borrow against) this valuable asset and repay the company with actual cash (which is what it needs)? It's going to be hard to pay the creditors with a bit of a painting. Art is illiquid and hard to value...

https://www.business-live.co.uk/business/business-news/gem-tanzania-dire...

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By bernard michael
12th Nov 2019 10:48

Just to clarify
The company will OWN the asset, which it has bought @ market value ? CGT Tax on the director based on increase in value from when he bought it
The company then later sells the asset back to the Director @ market value at date of sale.
Meanwhile the picture has increased in value. HMRC wouldn't accept a decrease as they'd suspect a fiddle to get out of S455
I agree either sell/mortgage the panting and pay the company in cash
But
We have no idea of the sums involved
Value of painting ?
Amount of Directors loan ?

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Replying to bernard michael:
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By Tax Dragon
12th Nov 2019 10:55

I think the idea was rather to 'lend' the painting to the company with the vague hope that the loans would be netted off for tax. The replies above seem to be founded on the notion that this might not work.

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Replying to Tax Dragon:
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By bernard michael
12th Nov 2019 11:05

Quote:

I think the idea was rather to 'lend' the painting to the company with the vague hope that the loans would be netted off for tax. The replies above seem to be founded on the notion that this might not work.


I can't see how it can work unless the company acquires title to the painting
Lending it will only work if the company can derive income from it eg by exhibiting it. The loan per see has no value to offset against the DLA
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