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bigduckontax
bigduckontax, Accountant
Category: Tax
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My company has lost it's biggest customer and we are thinking

Customer Question

My company has lost it's biggest customer and we are thinking of closing it down. It is solvent but we have substantial Directors loans that we will loose, about £20,000. Can we claim that loss from tax on other income, mainly pensions?
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question; bad news I'm afraid.
Unfortunately not. your sole recompense will be that that on dissolution you will probably have made a loss on your initial investment which can be allowed against capital gains in the year of closure or else carried forward. Your directors' loans are money sunk and lost.
Be careful on the close down not to create a fraudulent preference as the company is clearly insolvent and company law requires you to put it into administration. In any event any winding up must be undertaken by a licensed insolvency practitioner, this is true even were the company solvent. I suggest that the fees to wind up the company will largely gobble op what assets remain intact.
I am so sorry to have to rain on your parade.
Customer: replied 2 years ago.

OK thanks. ***** say the company is solvent it has a small amount of cash, about £2,000.00 and a bank loan in the same amount. What happens if there is no cash to pay the administrator?

Expert:  bigduckontax replied 2 years ago.
Then the official receiver will take over.
Please see here for the full gamut of what happens on closure through insolvency:
https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/396451/GP08_Liquidation_and_Insolvency_v3_9-ver0.10.pdf
Your company is clearly insolvent as it cannot pay its debts ie directors' loans. Of course, if the directors waive their loans then it can be closed down or sold off, the quickest and easiest way to dispose of an unwanted clean company; you can even do this on eBay!
Customer: replied 2 years ago.

The company has some equipment, not much, can we exchange it for our loans, write off the loans against these assets and then close the company and would it then be solvent?

Expert:  bigduckontax replied 2 years ago.

It sounds as though it would.

Closing a company these days is quite a palaver, it is much easier and quicker to sell it off as a clean company.

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Expert:  bigduckontax replied 2 years ago.
Thank you for your support.

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