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View Full Version : Writing off a company loan as a gift?



Emma Matthews
07-18-2012, 04:13 AM
Is it possible to gift an asset such as a company loan to an employee and what are the tax implications for company and employee? We have set up a loan agreement with an employee and the balance owed is short of £4k [they have not had it long]. Bonus payments are due soon and I wondered than in lieu of a cash bonus we could instead gift the asset which in essence I mean pay off the loan on their behalf. I'm not sure how this would work from an accounting persepctive. Has anyone ever done this who could advise of the process?:)

vangogh
07-24-2012, 02:52 AM
Welcome to the forum Emma. I'm sorry no one responded to your question sooner. I'm probably not going to be much help, since this isn't my area of expertise and even if it was I probably wouldn't know how things work in England. I do think the information you need will likely be on the HM Treasury site (http://www.hm-treasury.gov.uk/). I've tried searching the site, but haven't found anything.

The site does have contact page (http://www.hm-treasury.gov.uk/contact_index.htm) so if you can't find anything on the site, you should be able to ask someone.

Hopefully that's somewhat helpful. Sorry I couldn't offer more.

Business Attorney
07-24-2012, 01:43 PM
In the US, other than nominal gifts such as a turkey at the holidays, a company's transfer of property to an employee is generally considered to be compensation. As such, the value of the "gift" is recognized as income to the employee and is deductible by the employer as compensation expense. In other words, it's as if you gave the employee a cash bonus and he used the cash to pay off the loan.

I don't know the details of UK taxation, but I would be surprised if the result were different.