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Treatment of £14k gift to VAT registerd company

Treatment of £14k gifted to VAT registered company which was previously a loan.

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Hi, 

4 years ago my company received a £14k loan from a friend of mine which was 0 interest and with no urgent time limit to pay back. To this date the company hasn't paid any back (it has just been sitting on the balance sheet as a long term loan liability). My friend has now said they do not want it back and it can be treated as a gift.

Can someone please let me know if there are VAT and/or corpoation tax implications with this now it has been gifted to the company?

Thankyou in advance.

Replies (14)

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RLI
By lionofludesch
20th Sep 2020 15:17

Definitely no VAT. No supply has been made by the company.

Corporation tax may be a bit of a battle. Why has the debt been written off ? Is there any inter-trading between the company and the donor - or anyone conected with him ?

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By Paul Crowley
20th Sep 2020 15:33

I Always ask at beginning whether the loan is to company or to the person. If company fails will lender expect person to repay. Does person accept that premise.
If so then loan is to person and person introduces.

In this case is loan being written off or is friend now making gift to person

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By Cheshire
20th Sep 2020 16:28

Robertwebb wrote:

Hi, 

4 years ago my company received a £14k loan from a friend of mine which was 0 interest and with no urgent time limit to pay back. To this date the company hasn't paid any back (it has just been sitting on the balance sheet as a long term loan liability). My friend has now said they do not want it back and it can be treated as a gift.

Can someone please let me know if there are VAT and/or corpoation tax implications with this now it has been gifted to the company?

Thankyou in advance.

Timing issue?

https://www.accountingweb.co.uk/any-answers/treatment-of-financial-gift-...

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Replying to Cheshire:
RLI
By lionofludesch
20th Sep 2020 16:36

Cheshire wrote:

Timing issue?

https://www.accountingweb.co.uk/any-answers/treatment-of-financial-gift-...

The fact that it's regular income might make a difference.

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Replying to lionofludesch:
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By Cheshire
20th Sep 2020 16:46

As is getting half the facts and having to drag information out of posters.

Best to get paid for pulling teeth.

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By Tax Dragon
20th Sep 2020 16:48

Second hand debts are not exempt from CGT and you may also have to consider rules re discounted securities. So the old thread is not complete.

But it's nice to see some of PNL' and Justin's jousting from of old.

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By fawltybasil2575
20th Sep 2020 17:26

@ Robertwebb (OP).

In intending no offence there is an important inconsistency in your question.

In your ante-penultimate sentence your use of words (especially “do” and “can”) indicate that the loan to the company remains outstanding. In contrast, the words in your penultimate sentence (especially “has been gifted”) indicate that the loan is no longer outstanding, as the gift “has been” made.

The appropriate advice for you depends entirely IMHO on which of these two scenarios (I surmise the latter) is correct. Perhaps you would kindly clarify the point.

Basil.

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By frankfx
20th Sep 2020 18:33

The autumn budget may herald a hike in tax impositions.
The transaction has tax implications, at current rates , that need consideration.
Post budget the tax could be markedly different.
But like the answers to your question.. it's conjecture.

Take advice.£££_ of fun, or regret at stake.

What does your accountant have to say?
Has he she commented on the matter, from day one?

AML?

Out of interest , Awebers.... would you have raised any AML questions.
14000£ hanging around the balance sheet ?

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Replying to frankfx:
RLI
By lionofludesch
20th Sep 2020 18:42

frankfx wrote:

The autumn budget may herald a hike in tax impositions.

Now's not the time. 2030, perhaps.

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By Calculatorboy
20th Sep 2020 19:00

The question on everyone's lips here is ...Why doesnt your friend just give the money to you personally?

In future pay an accountant before you get in another muddle.

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Replying to Calculatorboy:
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By Tax Dragon
22nd Sep 2020 12:32

Maybe because the friend doesn't have the money to gift, having loaned it to the company four years ago (and waived the loan two years ago).

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Replying to Tax Dragon:
RLI
By lionofludesch
22nd Sep 2020 12:57

Tax Dragon wrote:

Maybe because the friend doesn't have the money to gift, having loaned it to the company four years ago (and waived the loan two years ago).

Pass a tenner round the circle 1400 times.

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Replying to lionofludesch:
Hallerud at Easter
By DJKL
22nd Sep 2020 13:10

Like my cunning plan when Bank of Scotland gave you £5 a month to any current account receiving £1,000 each month.

Spin the £1,000 around a chain of current accounts and for each £1,000 spun circa £50-£100 a month earned depending upon speed (A lot of S/Orders)- shame I only had two current accounts (my account and our joint account), salary to mine, transfer monthly sum to our joint housekeeping and we got 2x £5 from them every month. (I resisted the temptation to open myriad other accounts in other branches)

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Replying to lionofludesch:
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By Tax Dragon
22nd Sep 2020 13:51

The circle was broken two years ago.

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