Company loan for car not to be on the books

Hi all,

I have a dillema with a client. It is all very behind and last minute due to the old accountant.

The business took a loan out in the company's name for two Land Rovers. I have decided not to includethe vehicles on the books as there will be a horendous benefit to each of the two directors. Plus they do a ridiculous amount of mileage and the claim will be favourable.

Now so far I have left the loan in the company accounts and debited the payments for the vehicles to the loan account. This is contributing to a large overdrawn loan account balance (as they cost £10k each)

QUESTION

Do I have to leave the loan in the accounts OR I can I opt for somesort of 'substance over form' approach due to the fact that the vehicles will belong to the directors. If this approach is taken the repayments would be posted to the directors loan account?

Thanks in advance

Comments

  • stevo5678
    stevo5678 Registered Posts: 325
    Thanks WHA that's great.

    All my fears are as thought, guess I just need to be the bearer of bad news!

    You have summarised the position very nicely for me and acted as a wise conscience.

    The issue is the last accountant left him with 5 outstanding vat returns and a corporation tax liability he was not made aware of.

    It is what it is I suppose.

    Steve
  • Rachel
    Rachel FMAAT, AAT Licensed Accountant Posts: 349 Dedicated contributor ? ? ?
    I have something similar to this apart from the car was in the company for 2 years and then the director bought the car (at market rate) the car did have a loan on it which the company are still paying and is still in the balance sheet.
  • Neillaw
    Neillaw MAAT, AAT Licensed Accountant Posts: 307 Dedicated contributor ? ? ?
    Does the original loan agreement not have a clause in it which states that the loan was to be repaid upon the sale of the vehicle.

    Neil
  • Rachel
    Rachel FMAAT, AAT Licensed Accountant Posts: 349 Dedicated contributor ? ? ?
    hmmm just looked at the loan and it is doesn't actually mention the company just the director. Even though the car was purchased through finance as a company car. The company is paying the loan via standing order. Director has been paying BIK on car for last 2 years and company has claimed capital allowance. Do I need to go and rework the accounts?
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