My company owes me a lot of money

[EntCO]

Hi,

I have had a company for 10 years doing software products, the last product didn't go that well and my company owes me a lot of money (it doesn't owe anyone else anything). I have a contract at the mo, and I think I am IR35 proof because the contract is worded well and the entrepreneurial side of the business is still going along, the test is if the business is self employed which it clearly is.

I have receipts for the debt and my research indicates I can just repay the debt out of company income with no tax consequences, I wouldn't pay any tax, just repay debt for about a year. I feel I have got to get the debt (to me) out the company or it can't go on, plus I think I have a legal duty as a director to repay creditors even if that is me.

Am I correct in thinking I can just get my company to repay me in this way out of contract income?

[tractor]

...

Hi,

I have had a company for 10 years doing software products, the last product didn't go that well and my company owes me a lot of money (it doesn't owe anyone else anything). I have a contract at the mo, and I think I am IR35 proof because the contract is worded well and the entrepreneurial side of the business is still going along, the test is if the business is self employed which it clearly is.

I have receipts for the debt and my research indicates I can just repay the debt out of company income with no tax consequences, I wouldn't pay any tax, just repay debt for about a year. I feel I have got to get the debt (to me) out the company or it can't go on, plus I think I have a legal duty as a director to repay creditors even if that is me.

Am I correct in thinking I can just get my company to repay me in this way out of contract income?

The action you take depends on how you funded the enterprise and how you accounted for that funding. If you did it properly, the investment you made over the years will all be posted to your Director's loan account and is repayable but only after CT is accounted for annually. There may be some R & D allowances that you could have taken but you should have taken advice about them during the year the expenditure was made.

If you funded the expenditure by way of share issues, then the situation is entirely different.

Before doing anything, you need to speak to your accountant.

[TykeMerc]

Indeed.

I did something similar a couple of years back, the amount I put in was registered in the Directors loan account, the loss was on the company accounts and the repayment was just setting the loan account back to zero. Not at all complicated, your accountant can explain it properly in a few minutes.

[TheFaQQer]

I have had a company for 10 years doing software products, the last product didn't go that well and my company owes me a lot of money (it doesn't owe anyone else anything).

Where does the debt appear in the accounts? As others have said, if it's in the DLA then the company just repays that. It also depends on why the company owes you money - if it's because you have personally paid for expenses, then you need to make sure that they are genuine business expenses before paying out, otherwise you would hit benefit in kind issues.

I have a contract at the mo, and I think I am IR35 proof because the contract is worded well and the entrepreneurial side of the business is still going along, the test is if the business is self employed which it clearly is.

Nope - your IR35 status for this contract is based on the working practices of that contract, and nothing else. The fact that there is another side of the business is irrelevant when determining the IR35 status of your contract. Make sure you read up on IR35 and how it is determined before you go too far and end up getting caught.

Am I correct in thinking I can just get my company to repay me in this way out of contract income?

If it's been accounted for correctly, then yes. Speak to your accountant and check how to do it.