Paying off DLA

Rachel

~~Hello
Client has overdrawn DLA. They want to introduce personally owned assets, that the business used. However, HMRC says that the loan can only be paid by cash or dividend. Can they get paid in cash for the assets and then repay the DLA immediately?
Any advice gratefully received.
Thanks
Rachel

Monsoon

I disagree with HMRC. If the director makes a loan to the company, by way of being owed for the assets, he becomes a creditor. You can pay this off against a debtor. If HMRC are being pedantic, they'd need to find the cash, and move it in and out of the bank account to contra the creditor and the debtor, and make sure the book entries clearly reflect this.

Rachel

Thank you. I am only this clients bookkeeper and his accountant told him this, they also said that if he didn't do as they advised they would support him in an investigation.