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write back of DLA credit balance to P&L?

is the write back of DLA credit balance to P&L taxable?

is the write back of DLA credit balance to P&L taxable?

i think the answer is maybe - in this instance it is part of a sale of the shares owned 100% by the director. without the write back the potential buyer of the shares won't proceed so the company would probably apply to be struck off.

i think there is relief under s322 & s323 cta2009 but i am uncertain as to whether this extends to a dla as opposed to inter co debt

 

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By DJKL
21st Jun 2018 22:19

Why does the seller not sell the loan instead or as well as the shares? (Presuming both are his)

Subject to the numbers the purchaser gets a loan to in future possibly withdraw tax free (subject to price paid for the loan of course)

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to DJKL
22nd Jun 2018 06:57

Doesn't that equate to paying less for the shares? Or are you suggesting debt factoring - which is not tax free.

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to Tax Dragon
22nd Jun 2018 10:54

Much favoured by soccer clubs.

£1 for the shares, zillions for the loan.

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By Ruddles
22nd Jun 2018 09:05

Capitalise the debt. Job done.

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22nd Jun 2018 12:30

I love your idea DJKL- makes a lot of sense to me.

Thanks Dragon but the shares are unlikely to have any significant disposal value due to the magnitude of the loan.

thanks Lion I can see why.

I can't see any benefit in capitalising the debt in this situation Ruddles but thanks for the suggestion.

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By Ruddles
to nick farrow
22nd Jun 2018 15:09

Capitalising the debt is simple and gets rid of any tax issue - that’s the benefit.

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22nd Jun 2018 15:24

thanks Ruddles
in accounting terms the capitalisation will require a debit to the dla and a credit to share capital but for the sale of the dla by assignment there are no accounting entries required other than to subordinate some of the debt to creditors due in more than one year.

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to nick farrow
22nd Jun 2018 18:57

Yes the capitalisation requires a (very simple) accounting entry, and also filing a (very simple) form at Companies House. The debt assignment however requires a legal instrument, no doubt drafted by a lawyer for a nice fee, and is therefore the more complex of the two - although worth it for the purchaser if he realises the advantage it brings him.

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25th Jun 2018 10:30

thanks John very clear

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