A business run as partnership previously but converted into a limited company couple of years ago has been handed with a big bill on account of rental arrears from last 8 years.Basically the rent was supposed to be reviewed every year but it did not happen and now the full arrears have to be paid with interest.Is it possible to claim it as expense in limited company or the SA partner returns need to be revised?And does the date of decision matters for deciding the year in which the arrears should be claimed i.e if the decision has been reached on 10th april 2014 can it be put as provision in accounts ending march 2014?
Before thinking about how to handle the tax for this, I think that your client should first take legal advice as to the ability of the proprerty owners to charge interest on rental that had not been demanded in a timely manner. Also, they did not demand the money at the right time so did they forfeit their annual increase?
I certainly would not be happy to pay this especially as this is the person responsibility of the partners (a business that no longer exists) and not the limited company.
General advice here would be to seek legal counsel.
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Technically it would be a "Exceptional item", but you don't have to report it as such if its a SME.
But yes, you could put a provision in the accounts for the year ended 31 March 2014.
I would have expected the partnership to have "sold/transfered" all its assets & liabilities to the Ltd company so there is no reason to go back and redo anything in the past.
I would say technically this cannot be transferred to the company. You cannot transfer a personal debt to a company as it is a separate legal entity. If the landlord was prepared to consider the unpaid rent increase from the past as debts of the company and invoice it out accordingly then I guess it would get through unnoticed but that is not the correct procedure as far as I understand it.
