Julie2011 Registered Posts: 33 πŸ’« 🐯 πŸ’«
Sorry, using and abusing this forum this week! One question answered and another crops up!

Bit of a strange one! New Ltd co set up after the company they worked for went bankrupt, they have done really well and managed to pick up a contract that was in the pipeline with the bankrupt company. The new ltd co directors were approached by their former employer as he was not happy with the contract they picked up which he claimed was his! Tough luck would be my reply, however the new co directors felt guilty as the prev guy had been their friend as well as employer so they paid him Β£5000. Well.......after a year and a half of trading the old boss has said he wants more money! Another Β£6000! Yes I would tell him to get lost too, but the directors feel guilty that they have done so well after his down fall (turnover Β£700,000). So my question... if they pay him Β£6000, how do I account for it in the accounts??? Their problem if he comes back for more!

Thanks for any advice! Again!


  • Monsoon
    Monsoon FMAAT, AAT Licensed Accountant Posts: 4,071 πŸŽ† 🐘 πŸŽ†
    The payment is arguably not a trading expense and so not deductible. They are under no obligation to pay him and are being philanthropic. Like you, I think they're mad to be paying him money. Have you suggested they take legal advice on this? They don't want to set a precedent of a contractual payment.
  • Julie2011
    Julie2011 Registered Posts: 33 πŸ’« 🐯 πŸ’«
    I did go back and suggest they contact a solicitor, think they were trying to go down the route of purchasing the previous companies goodwill, they did originally trade with an almost identical name but then changed it to distance themselves. Bit of a nightmare situation, but think I will persuade them to see a solicitor. Thanks
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