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MVL - Overdrawn loan

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    MVL - Overdrawn loan

    Reference to this CTM61559 - Company Taxation Manual - HMRC internal manual - GOV.UK (Updated 23 January 2020)

    If I am not mistaken, it does indicate clearly that loan can be offset against distributions and capital gains tax would apply.

    Is that correct?

    #2
    Don't know.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

    Comment


      #3
      But one of our accountant poster might know.
      "I can put any old tat in my sig, put quotes around it and attribute to someone of whom I've heard, to make it sound true."
      - Voltaire/Benjamin Franklin/Anne Frank...

      Comment


        #4
        Yes it can via a paper transaction, but not all liquidators will deal with this as it adds complications to the process.

        Comment


          #5
          Is this in effect a Distribution Of Specie ? As per Clarity on Distributions in Specie and S455 – Frost Group

          Comment


            #6
            Originally posted by ChimpMaster View Post
            Yes it can via a paper transaction, but not all liquidators will deal with this as it adds complications to the process.
            This.

            Historically MVL Online offered to take on cases with director loans in a limited number of circumstances, and with an additional £200+VAT fee.

            We stopped this about a couple of years ago, as:
            1) there was a Taxation article suggesting risk shareholders would be taxed on the earlier drawing of cash as dividends, rather than it be treated as a loan cleared via distribution from liquidation. This would realistically negate the main benefit of offerings like ours.
            2) being honest, they were a pain.

            However, further guidance coming out since the Taxation article I refer to suggests it has been debunked/superceded/whatever, and that paper only distributions/distributions in specie to clear director loans should be ok from a tax perspective. We're still not massive fans...but where enough clients want something strongly enough, we may need to reconsider our business model/offering.

            I'll have a chat with my business partner (the licensed insolvency practitioner behind MVL Online) next week re this, see whether it's something that in certain circumstances (predominantly where it's taken immediately prior to liquidation, rather than being a long term one with S.455 etc in play) we're happy to get involved with again.

            Comment


              #7
              Thanks.

              Oddly enough, I spoke with my accountant today and raised that point, they actually said that they can't prepare cease-of-trade accounts if there's an overdrawn loan, and it needs to be repaid first...which I don't think is right.

              I have forward them HMRC guidance and waiting for feedback.

              Comment


                #8
                Originally posted by Maslins View Post
                I'll have a chat with my business partner (the licensed insolvency practitioner behind MVL Online) next week re this, see whether it's something that in certain circumstances we're happy to get involved with again.
                That would be great.

                Would going down this route effectively speed up distribution, since you wouldn't need to wait for bank to transfer you the funds ?

                Comment


                  #9
                  Originally posted by amrhady View Post
                  That would be great.

                  Would going down this route effectively speed up distribution, since you wouldn't need to wait for bank to transfer you the funds ?
                  Seen your comment re your accountant, I would still strongly recommend your situation is cash only as at final set of accounts stage. Otherwise your accountant will have to declare the outstanding loan on the CT return, with potential S.455 issues as they won't be able to confirm the loan has been cleared with a date in the future.

                  Ignoring that though, yes, if (and at this stage it's very much an if) we decide we're happy to go ahead with that, it would we could mock up paperwork for the first distribution within a day of our appointment, with that just clearing the loan you'd taken a few days earlier. I'm very much thinking that situation, rather than a case where a client has had a fairly permanent loan for ages.

                  Of course plenty of other liquidators out there who may well already offer this option or similar.

                  Comment


                    #10
                    Originally posted by Maslins View Post
                    Seen your comment re your accountant, I would still strongly recommend your situation is cash only as at final set of accounts stage. Otherwise your accountant will have to declare the outstanding loan on the CT return, with potential S.455 issues as they won't be able to confirm the loan has been cleared with a date in the future.

                    Ignoring that though, yes, if (and at this stage it's very much an if) we decide we're happy to go ahead with that, it would we could mock up paperwork for the first distribution within a day of our appointment, with that just clearing the loan you'd taken a few days earlier. I'm very much thinking that situation, rather than a case where a client has had a fairly permanent loan for ages.

                    Of course plenty of other liquidators out there who may well already offer this option or similar.
                    From a future customer's (me) point of view, this would be a good option to have.

                    Comment

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