Write off of loan from director pre liquidation

Is this needed?

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I am acting for a company which has not traded for a number of years, and whose only item on the balace sheet is a large loan to the director/shareholder.

I am proposing simply striking off the company via form DS01 - presumably there is no need to actually formally write off this loan as the people to who the loan is too are actually the ones applying for strike off? Or does having the loan in the accounts prevent a strike off? I am hesitant to prepare accounts with this loan actually written off as to do so would create a taxable loan relationship credit I believe. So I guess my question is, are there any consequences that I have missed from simply filing form DS01 now, mid way through an accounting period, with the outstanding loan? Presumably the director will now have a personal capital loss equal to the loan value?

Replies (6)

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By andy.partridge
01st May 2019 14:25

You've got a big debit. Where's the big credit?

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Replying to andy.partridge:
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By Sarahk87
01st May 2019 14:36

Apologies - I've just realised I've written it down back to front!! Its a loan from the director to the company, so it's a credit in the company's balance sheet. Hence my worry if I actually 'write it off' in the books the would be a LR credit for corporation tax. More haste less speed as they say.....

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By andy.partridge
01st May 2019 15:03

OK. You've got a big credit. Where's the big debit?

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paddle steamer
By DJKL
01st May 2019 15:15

Usually, in these cases, in the reserves.

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Replying to Sarahk87:
By johngroganjga
01st May 2019 17:13

You can’t “write off” the loan, only the creditor can. But from what you say about the financial position of the company there is not the slightest point in him doing so.

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paddle steamer
By DJKL
01st May 2019 15:00

I tend to keep hold of companies with loans from directors in case another non geared " project" comes up in future where profits can be fed through the company, however that presupposes DIY accounts each year and paying £13 per year for the latent opportunity.

I do have one such with loans from directors that I intend to axe but that is only because I want the capital losses re the original shares issued (£160,004), for those where the share capital is a nominal £100 the loan potentially has a future value for the original individuals making the loan, especially when the loan arises in a company that did not use the funds for trade purposes ( e.g. property investment)

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