Taxation magazine queries ― loans to participators

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Owner-Managed Businesses

Guidance

Overview

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.

Joint directors’ loan account for divorcing couple

Details of the query as copied from Taxation magazine

I have recently been appointed to represent the wife in a divorce case. She and her husband were 50-50 shareholders in a successful family company. For the many years they operated, they funded most of their private expenditure through the company. The company's accountant/tax adviser did a good job of identifying private expenditure and charging it to a loan account which was cleared each year via dividends. However, he treated the loan account as a joint account and didn't differentiate between private expenditure attributable to the husband and the wife. Everything was lumped together. As part of the divorce,

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