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accounting for theft

burgburg Experienced MentorGloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
in General accounting discussion
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?
Regards,

Burg

Comments

  • slackdaslackda Trusted Regular Registered Posts: 460
    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.
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    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'?
    Regards,

    Burg
  • slackdaslackda Trusted Regular Registered Posts: 460
    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
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    How much is it?

    Sundries perhaps?

    No tax relief unfortunately.
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    it's about £15k taken of which around £8k remains.

    No tax relief? shame.

    Got some legislation encase of query from client Dean?

    Thanks
    Regards,

    Burg
  • DeanDean Experienced Mentor DevonRegistered Posts: 646
    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?
  • PoodlePoodle Experienced Mentor Registered Posts: 711
    Section 419

    It may be that this applies as well?

    http://www.hmrc.gov.uk/MANUALS/ctmanual/CTM61630.htm
  • deanshepherddeanshepherd Font Of All Knowledge Registered Posts: 1,809
    Another good link here.
  • burgburg Experienced Mentor GloucesterModerator, FMAAT, AAT Licensed Accountant Posts: 1,441
    Thanks Dean. I agree that it fails 'wholly and exclusively'

    Dean S - good link thanks
    Regards,

    Burg
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