accounting for theft

burg

Just want to clarify my thoughts on a situation.

A director (non shareholder) sets up a company in competition without the knowledge of the shareholders. He uses the existing company bank account to pay the way for the new company. He gets caught and flees the country back to his homeland.

What to do with the monies that cannot be recovered? write it off against p&l?

slackda

no chance of recoving the funds?

If there is a chance then could argue holding it on the Balance sheet and amortizing overa period

if not i would agree w/o asap.

burg

No there is no chance. Basically the director handed over the shares in the new company which was then dissolved. He then fled back to his home country. Unless he decides to return they can't really chase him.

I tend to agree to write off but wanted some other thoughts

Further to that. What would the heading be? 'Bad debts' isn't really appropriate. 'Thefts' wouldn't look particularly good. Ehat about 'irrecoverable funds'?

slackda

burg wrote: »

No there is no chance. Basically the director handed over the shares in the new company which was then dissolved. He then fled back to his home country. Unless he decides to return they can't really chase him.

I tend to agree to write off but wanted some other thoughts

Further to that. What would the heading be? 'Bad debts' isn't really appropriate. 'Thefts' wouldn't look particularly good. Ehat about 'irrecoverable funds'?

i'd go with the third option

deanshepherd

How much is it?

Sundries perhaps?

No tax relief unfortunately.

burg

it's about £15k taken of which around £8k remains.

No tax relief? shame.

Got some legislation encase of query from client Dean?

Thanks

Dean

Strictly speaking the balance should go to the director's account to be repaid. (You could get into P11d issues here also!) As this is unlikely writting off to the p&l would be 'ok' but as Dean says, strictly speaking No tax relief due: Here's some gumf under "wholley & exclusively": http://www.hmrc.gov.uk/manuals/bimmanual/BIM37000.htm

However can you not add some weight so to speak to the transactions therefore, claiming tax relief? As you are the only one who knows all the facts you are the only person you can answer that.

Failing that, you might like to consider a capital approach and potentially claiming a capital loss for future offset?

Poodle

Section 419

It may be that this applies as well?

http://www.hmrc.gov.uk/MANUALS/ctmanual/CTM61630.htm

deanshepherd

Another good link here.

burg

Thanks Dean. I agree that it fails 'wholly and exclusively'

Dean S - good link thanks