outstanding directors loan

[pleasehelp1]

Hello, Im pretty desperate and wondered if anyone could help me. I liquidated company, (child is disabled and I'm unable to continue operating business), I am advised by liquidators that there is an outstanding directors loan account and I have been asked to complete an income/expenditure form. I am unable to work and have no income. My husband earns barely enough to pay our outgoings so we have no disposable income to make a repayment plan. I have personal debts but do have some equity in my house. Does anyone know if they can force the sale of my home to repay the directors loan account? remortgage is not possible as I am no longer working so on a temporary interest only agreement.

Does anyone know if there is any chance liquidators would negotiate amount and/or delay of repayment until I can find work around my child and possible remortgage?

 

[ChrisCallaghan]

Does anyone know if they can force the sale of my home to repay the directors loan account

Does anyone know if there is any chance liquidators would negotiate amount and/or delay of repayment until I can find work around my child and possible remortgage?

In short, yes to both.

Yes, the appointed liquidators can go after your personal property, however to do so incurs costs. Most would consider/prefer holding off for a period of time to allow you to do a you've suggested. If you have not done so already, complete the income and expenditure form, and speak to them about your position, and that you will look to remortgage to make a settlement offer once you have found work.

 

[Frank Wessely]

Hi @pleasehelp1

Thanks for posting.

Were you unaware of the overdrawn DLA?

Have the liquidators explained how the balance has arisen?

Have you reconciled the underlying figures?

Have you reviewed the company’s financial records to see if there are other transactions that might mitigate the balance in your favour?

Your accountant could help with this.

Thanks.

 

[ChrisCallaghan]

@pleasehelp1 this is sound advice. I always jump to dealing with the repayment side (my apologies) but Frank's suggestions are the first thing you should do.

 

[Mark James]

How much do you owe?

 

[Lisa Thomas]

How much do you owe, and how much is your share of equity in the property worth?

 

[pleasehelp1]

In short, yes to both.

Yes, the appointed liquidators can go after your personal property, however to do so incurs costs. Most would consider/prefer holding off for a period of time to allow you to do a you've suggested. If you have not done so already, complete the income and expenditure form, and speak to them about your position, and that you will look to remortgage to make a settlement offer once you have found work.

thank you for advice, there is no disposable income and I worry sending this form would mean they sell my house to recover the money faster, should i reduce payments to my personal debts leaving a little disposable income for them to consider or would it have to be a large amount for them not to go after my house?

 

[pleasehelp1]

Hi @pleasehelp1

Thanks for posting.

Thank you for reply really apprechiate your help!

Were you unaware of the overdrawn DLA?

Stupid I know, highly stressed at the time leading unto liquidation I didn't get my accountant to check it first, for years I took a minimal wage and my accountant would usually total any personal transactions end of year and put it through as dividends - I think (I never got any actual dividend payments in money at year end but it was declared on self assessment form)

Have the liquidators explained how the balance has arisen?

Its personal transactions for a period of 2 years prior to liquidation date - last set of accounts prior to this was no outstanding directors loan.

Have you reconciled the underlying figures?

I don't have a final figure yet - they asked me to explain transactions - some I'm not sure if classed as personal or not eg my health insurance, childcare, car insurance (car leased business name but also used personally)

Have you reviewed the company’s financial records to see if there are other transactions that might mitigate the balance in your favour?

Can only think of the very long hours I worked for the £500 monthly wage drawn

Your accountant could help with this.

Im owe them for my last personal tax return, we have no spare money apart from 100k equity in my house which I can't get refinanced (mortgage prisoner) - cant get new lender as no longer working

I have personal loans/credit cards but am managing to pay them

Thank you again for your help

 

[pleasehelp1]

How much do you owe?

I just have a list of transactions that they asked me to explain - some are genuine business transactions/ some personal and some im unsure. I have not had a final figure yet but they want me to fill in these financial forms.

 

[pleasehelp1]

How much do you owe, and how much is your share of equity in the property worth?

I dont know exact amount yet, Im guessing around 30k-40k.

We have 100k equity in our home (old self cert mortgage, they are no longer lending) and I cant go elsewhere to remortgage as i'm not in employment.

 

[Elliot Green]

It is not uncommon for a Director to negotiate with a Liquidator their overdrawn director's loan account ("ODLA").

There can be two typical points to consider:

Is the amount claimed owed?
Can the party afford to repay it?

A person with limited means can be in a reasonable negotiating position because suing someone for a paper judgment is a) expensive and b) often unproductive.

However, it is important to bear in mind any element of the ODLA written off / released by a liquidator is not written off fully because under Section 415 of the Income Tax (Trading and Other Income) Act 2005 the written off / released element is treated as income and assessed by HMRC on the individual personally. https://www.legislation.gov.uk/ukpga/2005/5/section/415

 

[pleasehelp1]

It is not uncommon for a Director to negotiate with a Liquidator their overdrawn director's loan account ("ODLA").

There can be two typical points to consider:

Is the amount claimed owed?
Can the party afford to repay it?

A person with limited means can be in a reasonable negotiating position because suing someone for a paper judgment is a) expensive and b) often unproductive.

However, it is important to bear in mind any element of the ODLA written off / released by a liquidator is not written off fully because under Section 415 of the Income Tax (Trading and Other Income) Act 2005 the written off / released element is treated as income and assessed by HMRC on the individual personally.

Thank you, I have now received the list with transactions that they attributed to the ODLA. I agree with the majority but just wanted to check a few that I thought would be considered business expenses

Does anyone know if the following should have been considered business related or are the correct in saying its a personal transaction.

• Garden office built during covid for work from home
• Mobile Phone credit agreement (they have removed call charges but device billed separately still applies)
• Parking charges for my car while I was at work
• Health insurance
• Gym membership
• Self employed staff member used for childcare to allow me to work

I will need to try and get a loan to enable settlement

Does anyone know what would be a reasonable settlement offer that the liquidator would likely to accept on 40k? or are they just as likely to accept a monthly amount to avoid me paying interest on a loan?

 

[IanSuth]

my "guess" on these and I am not using accountancy speak just common sense

• Garden office built during covid for work from home [Personal as still in your garden]
• Mobile Phone credit agreement (they have removed call charges but device billed separately still applies) [Do you have the handset still - if so Personal]
• Parking charges for my car while I was at work [ These 3 i would guess it depends on whether you listed as a benefit in kind and paid income tax, if you did then work expense - if not then personal]
• Health insurance ditto
• Gym membership ditto
• Self employed staff member used for childcare to allow me to work - [Bit of a hindsight thing but i think unless you did this properly via payroll under childcare tax credit rules then personal]

In general terms, these things all seem to be benefits you had personally, so it depends on whether you listed them all on p11d - if so then you have paid tax on them as benefits paid by company and you can argue company expense, if not then you have already agreed these are not benefits in kind from your employment and as such any money the company spent on them must have been a loan to you. If you had had a member of PAYE staff and they were given those by company they would have been taxed on them.

 

[mahad]

my "guess" on these and I am not using accountancy speak just common sense

• Garden office built during covid for work from home [Personal as still in your garden]
• Mobile Phone credit agreement (they have removed call charges but device billed separately still applies) [Do you have the handset still - if so Personal]
• Parking charges for my car while I was at work [ These 3 i would guess it depends on whether you listed as a benefit in kind and paid income tax, if you did then work expense - if not then personal]
• Health insurance ditto
• Gym membership ditto
• Self employed staff member used for childcare to allow me to work - [Bit of a hindsight thing but i think unless you did this properly via payroll under childcare tax credit rules then personal]

In general terms, these things all seem to be benefits you had personally, so it depends on whether you listed them all on p11d - if so then you have paid tax on them as benefits paid by company and you can argue company expense, if not then you have already agreed these are not benefits in kind from your employment and as such any money the company spent on them must have been a loan to you. If you had had a member of PAYE staff and they were given those by company they would have been taxed on them.

Your "guess" is quite correct, sir. Good job explaining everything

 

[Lisa Thomas]

I would say £20k lump sum might achieve an acceptable settlement, however I highly recommend you use a specialist insolvency solicitor to negotiate for you. I can recommend one, if you DM me.

Please bear in mind if you are unable to reach a settlement, the liquidator could ultimately bring enforcement proceedings against you - the most likely one being Bankruptcy, I'm afraid, so your share of equity in the house is on the line.

 

[UK Contractor Accountant]

Garden office built during covid for work from home [Personal as still in your garden]

??? might be a company asset if all bills were in company name.

Can it not be taken down and erected somewhere else?

If company asset then up to liquidator to sell it - might be able to buy it back cheaper then the original cost - flash sale value!

 

[Elliot Green]

thank you for advice, there is no disposable income and I worry sending this form would mean they sell my house to recover the money faster, should i reduce payments to my personal debts leaving a little disposable income for them to consider or would it have to be a large amount for them not to go after my house?

In general terms the claiming of an ODLA is a *claim*. That means if the sum *claimed* is disputed the matter is materially different to if it is accepted.

Once a matter is disputed it in effect becomes adversarial. The risk for *both* parties goes up because of the issue of costs in potential litigation. However notwithstanding that, generally a person who has a *genuine* dispute over an ODLA has a better bargaining position because it usually costs money to litigate the claim and in litigation there is always a risk.

 

[mahad]

I would say £20k lump sum might achieve an acceptable settlement, however I highly recommend you use a specialist insolvency solicitor to negotiate for you. I can recommend one, if you DM me.

Please bear in mind if you are unable to reach a settlement, the liquidator could ultimately bring enforcement proceedings against you - the most likely one being Bankruptcy, I'm afraid, so your share of equity in the house is on the line.

Throwing a "might" and praying it'll be accepted won't be enough in my opinion, better take the safe option and use a specialist, he might come up with somethings that you won't ever think of

 

[Elliot Green]

Hello, Im pretty desperate and wondered if anyone could help me. I liquidated company, (child is disabled and I'm unable to continue operating business), I am advised by liquidators that there is an outstanding directors loan account and I have been asked to complete an income/expenditure form. I am unable to work and have no income. My husband earns barely enough to pay our outgoings so we have no disposable income to make a repayment plan. I have personal debts but do have some equity in my house. Does anyone know if they can force the sale of my home to repay the directors loan account? remortgage is not possible as I am no longer working so on a temporary interest only agreement.

Does anyone know if there is any chance liquidators would negotiate amount and/or delay of repayment until I can find work around my child and possible remortgage?

Consider using a specialist insolvency solicitor to assist you, even if it is unlikely to be a huge issue, other claims can sprout later. Settlement agreement can be negotiated to protect both parties such as for example only on what is called a full and final settlement basis.