UK Write off negative Payable account to Shareholder

[crisdall]

Hi, I have a negative balance in the account payable to Shareholder, that means business have paid too much.. now, as the shareholder will not reimburse the amount to the business, i would need to write off the balance of the account payable. Is it possible to write off the balance with capital contribution account?
Thanks

 

[Fidget]

In short, no. Presumably this is ordinary shares and once the purchase of them is complete then that's that. You'd need to write the amount off to the P&L. Although, being a shareholder, they're entitled to any dividends the company pays on their class of shares, and if the shareholder owes the company money then there's the option of transferring that to the debt owed by the shareholder instead of paying it to the shareholder. I'm not sure about the legalities of doing that though, so it's just an idea rather than telling you do actually do it. But it might be a way of recouping the loss rather than writing it off.

 

[Drmdcpa]

In the US if you write it off, the shareholder has to recognize ordinary income for cancellation of debt. To avoid this I often adjust cash distributions from the corp to the owners meaning that owner will get less cash than their share of distribution.

 

[Tony Grove]

Can declare dividend and offset the dividend payable with that "negative payable balance"?

 

[Drmdcpa]

See post above your question. Specifically, "to avoid this I often adjust cash distributions from corp to owners meaning that the owner will get less cash than their share of distribution."