Taxation magazine queries ― loans to participators

Produced by Tolley

The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:

  • Taxation magazine queries ― loans to participators
  • Winding up the company in error
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • Excessive pay treated as a loan to participator
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • Loan to a connected company and loans to participator rules
  • Details of the query as copied from Taxation magazine
  • Link to responses
  • More...

Taxation magazine queries ― loans to participators

The following guidance note provides details of queries raised on loans to participators in the last few years in the Readers’ Forum section in Taxation magazine with a link to the full replies. It should be noted that the response to the queries is at a point in time and all relevant legislation should be confirmed as being currently applicable.

Winding up the company in error

Details of the query as copied from Taxation magazine

We have been approached by a new client who, with his wife, owned a property company that owned just one property. The couple had £278,000 of share capital divided equally between them. In January 2020, the property was sold and after the payment of corporation tax the company was left with £400,000 in the bank. Unfortunately, my client was unaware that he could not just wind up a company with more than £25,000 in assets under the capital gains tax rules. In March 2020, the couple withdrew all the money from the bank and the registrar of companies was requested to strike off the company in September 2020. This would obviously be problematic if the £400,000 was treated as a distribution. My suggestion is to treat the withdrawal as a directors’ loan account, have the company reinstated and then arrange for a members’ voluntary liquidation, setting the loan against the proceeds on the liquidation. My concern is that we have to draw up a balance sheet at 30 September 2020 and this will show a directors’ loan account. If the courts do not agree to reinstate the company because the only reason for doing so is to benefit the shareholders and not the company itself, then we could be faced with a balance sheet showing a debtor which could fall into the hands of the Crown as bona vacantia. Is my idea sound? Is there a risk of losing the whole sum or are there any

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