LLP debtor / partner query
Janice 19 Nov 2009 - 14:52
I currently have a balance sitting in Debtors of amounts due from members in my LLP accounts - this is made up of the difference between drawings and LLP profit at the year end.
I have checked the LLP agreement and there is no provision for the drawings to be paid back and if the members are not going to pay them back I presume I will have to write them off.
If I do have to write them off can you help with the following questions
1. Do I write the debtor off to the P&L. as remuneration.
2. Is the amount an allowable expense.
3. If its an allowable expense is it then taxable as income on the individuals.
An interesting one. Given tax
An interesting one. Given tax isn;t my thing I will comment on 1 but not 2 or 3.
My thought process is:
- initially it is a debtor because the money's owed back. LLPs apply UK GAAP. There is an asset because the LLP has 'right to future benefits (i.e. repayment) based on past transactions (i.e overdrawing the profits)
- if the debtor's not recoverable you write it off to the P+L as you suggest
- 'members' remuneration charged as an expense' is, per the LLP SORP, where you put non-discretionary amounts to which members are automatically entitled, so I wouldn't place the expense on that line
- Is it therefore appropriate to create a separate line on the P&L (loans to members written off)? This arguably doesn't require separate disclosure because LLP law and the SORP don't mandate it
What would you do with an overdrawn director's current account that's not recoverable? Surely the principle here is the same?.....
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