What was the problem?

Through a recommendation from an existing client, we were approached because over a number of years, the Directors’ Loan Accounts had become significantly overdrawn which resulted in unfathomable tax arrears with HMRC. We were asked to help devise a plan which over the medium term would help rectify the Directors’ Loan Accounts and clear down the tax arrears.

What was the solution?

After performing a thorough review of what the business did, how it did it and what had led the company and Directors to find themselves in the position that they were in; we established that there were a number of opportunities which had previously been overlooked. We recommended three things which would help to correct the situation: 

1. the company had not previously submitted a claim for the Research and Development work that it did; this meant that the company’s Corporation Tax liability had been larger than necessary,
2. we advised that the business should rent the business premises from the two directors as this would assist reduce the overall tax burden, and
3. we advised that a Capital Allowance claim should be made in relation to the on the business premises which would assist reduce the size of the overall tax burden. Again, these allowances had previously been unclaimed. 

What was the result?

Over a couple of accounting years, the Research and Development claims which we assisted with; together with the carefully planned bonuses and dividends, and the reduced profitability as a result of the newly created rent charge, put the Directors’ Loans back in credit and reduced the Tax Liabilities to something much more manageable.

Not only were past issues resolved, but our client stands to benefit in perpetuity, from the work that we did or at least until HMRC change the goalposts.