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More Director Loan Woes !

SevrenSevren Well-KnownRegistered Posts: 101
Hi all, a bit of experience required please !

A client wishes to clear Director's Loan just prior to year end with a cash injection only to then take the money back out again a few days later.....

The objective is to improve the company credit rating and not avoid Section 419 liability - I can hear the Inspector's laughter now.

In my mind under HMRC manual EM8565 this is 'bed & breakfasting' to distort the balance sheet and have said so.

Client has taken advice from a chartered accountant who confirms that as long as the cash physically moves into the company, albeit only to move rapidly out again, then this is a legitimate transaction and the balance sheet is a true picture.

Before I bog myself down in ethics, any advice as to whether I am missing the point would be welcomed - apparently this is common practise !

Many thanks as always


  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    From a tax point of view, it is a perfectly legitimate way of repaying a director's loan to avoid a S.419 liability. HMRC would love there to be legislation to stop this but, contrary to what their manual suggests, there isn't any.

    From an accounting point of view, well.. I'll leave that one up to the accounting standards expert!
  • beverly hudsonbeverly hudson Feels At Home Registered Posts: 95
    I agree with the chartered accountant in terms of the accounting-as long as the money is paid in at the balance sheet date it matters not if it is subsequently withdrawn straight after. You are only reporting as at the balance sheet date-anything beyond that date is irrelevant. Im uncertain that there is an accounting standard for such a transaction.

  • SevrenSevren Well-Known Registered Posts: 101
    Ok - many thanks !
  • Emthi27Emthi27 Just Joined Registered Posts: 3
    I think it may be a creative accounting
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