Purchase of company asset by director

Purchase of company asset by director

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Hi,

 A client purchased machines worth of £170,000 in finance two years ago under the company name. Company did not make enough profit to make the payment. Director/owner personally paid the balance to supplier of machines.
Now he wants to evaluate the machinery and buy them (paid by director loan account liability) and then rent them back to the company.

Any issues he should be aware of ?

Replies (10)

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By Tax Dragon
19th Mar 2018 16:57

That his advisor is providing second-hand advice obtained from strangers on a forum s/he's just joined?

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Replying to Tax Dragon:
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By LUSH
19th Mar 2018 17:21

Tax Dragon wrote:

That his advisor is providing second-hand advice obtained from strangers on a forum s/he's just joined?

It is better to comment if you can.

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Replying to LUSH:
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By Tax Dragon
19th Mar 2018 17:39

My point was that your question "any issues?" (combined with your tags of accounts, investments and tax tips) is incredibly broad. Broad enough to encompass - maybe even highlight- the one I identified.

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Replying to Tax Dragon:
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By LUSH
19th Mar 2018 20:16

Sorry misunderstood your comment. I am new in this forum I am learning how to use it. I will be more specific in the future. When I say “any issues” I meant anything that prevent him buying the machines.

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paddle steamer
By DJKL
19th Mar 2018 17:57

Tax
Vat
BIK
Insolvency issues
Liquidity issues
Business sense

Should do for starters.

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By Accountant A
19th Mar 2018 18:05

LUSH wrote:

Any issues he should be aware of ?

Can you be more specific?

You say he is your "client". What services are you providing him with?

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Replying to Accountant A:
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By LUSH
19th Mar 2018 20:10

I look after their bookkeeping and VAT.
I am aware of the CGT implication. But I would like to know if there is any VAT or Company Act implication to dispose these machines to Director.

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Replying to LUSH:
paddle steamer
By DJKL
19th Mar 2018 20:13

What CGT implications are they?

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Replying to LUSH:
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By Accountant A
19th Mar 2018 21:12

LUSH wrote:

I look after their bookkeeping and VAT.
I am aware of the CGT implication. But I would like to know if there is any VAT or Company Act implication to dispose these machines to Director.

If you are only engaged to deal with bookkeeping and VAT, you would be ill advised to try to offer advice on other areas outside your specialisms - and certainly not based on what you are told on an anonymous forum.

Surely someone who was spending £170k on machinery recently has an advisor on accounting and tax matters generally? He certainly needs someone.

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By Tax Dragon
19th Mar 2018 23:10

I would echo Accountant A's comment. As a professional, you should restrict your services to those you are both competent to provide and engaged to provide. The comment is in no way demeaning or personal -it is true of all of us. And you are not the first bookkeeping professional to be advised in these terms. See eg https://www.accountingweb.co.uk/any-answers/property-income-for-married-...

As I said in that thread, the advice to the OP (in this case you) is for the OP's protection as well as for the client's.

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