Postby LozaACCS » Thu May 25, 2017 9:57 pm
It seems pretty bad to me.
I look at this from a moral perspective that if an employer waives or releases a loan with an intention of avoiding tax on the employee or seeking to assist the employee in his attempt to do so, then the P11D or general earnings rules are set in place to counter this, (although it is clear that we do not know specifically how to proceed on the issue).
I would contrast this with the position here (I assume), where the employer (to use emotive language) has been stiffed by the former employee, why should the employer, who is already out of pocket suffer even more.
The employer needs to recognise in his accounts that he has a bad debt under GAAP, section 35(b) ITTOIA 2005 in my opinion allows him to do this and obtain tax relief, releasing the former employee from his debt is probably the last thing he desires, and in my opinion is not necessary.
For VAT purposes I believe the debt must be formally written off, I do not believe there is any such requirement for income or corporation tax purposes.
I would reiterate that no P11D nor PAYE adjustment is required since no formal release or waiver of a debt has taken place.