Currently dealing with a company with a year end of June 2018.
In the accounts for the year ended June 2018 the company has advanced one of the shareholders £200k.
This payment has been provided as more of an advance because they are going to sell a portion of the shares (10 shares at £1 par value) back to the company.
The company has in excess of £500k in retained earnings.
My understanding is that if this loan is not repaid within 9 months and a day from 30th June 2018, i.e by the end of March 2019 then there will be an advance corporation tax payment due of 32.5% of this balance, i.e £65k.
What the shareholders plan to do is get all the necessary paperwork together by the end of this month to approve the buy back of shares by the limited company.
My assumption is as long as that is done, then the £65k will not become payable, i.e the advance/loan will have been discharged.
I will in theory then be able to state in the balance sheet this loan/advance from the company to the director as an 'other debtor' in the accounts.
In the accounts for the year after that which run from 1st July 2018 - 30th June 2019 the double entry will simply be:
DR Share Capital £10
CR Capital Redemption Reserve £10
CR other debtors £200k
DR Retained Earnings £200k
Regarding other taxes, I need to make my client aware of the stamp duty of 0.5% on the disposal of shares payable by the limited company, so there is a liability of £1000 and also confirm exactly when this loan was taken out and check whether interest was charged on it. If no interest was charged then a BIK could be liable by the shareholder who would need to record this on his own personal tax return. There will obviously be a large capital gain payable as well for the shareholder based on the gain on disposal of his shares to the company.
Am I missing anything ?