Readers’ forum: Dealing with outstanding director’s loan post-death

A small trading company loaned one of its elderly director/shareholders £750 000 about five or six years ago and section 455 tax has been paid in full by the company. The other directors/shareholders are close family.

It has been suggested that if the loan remains outstanding and is then formally waived after his death the estate will only suffer basic rate income tax on the distribution with no recourse to beneficiaries. The company’s reserves are sufficient to absorb the write off.

It is likely that the director will die with minimal assets and the only outstanding liability being this debt owed to the company. It is assumed that his shares will either pass to the children before he dies or would not be worth much in any case. It is more than likely that it will be a technically insolvent estate but the family will not chase the debt....