Dealing with connected people.
WHAT A RELATED PARTY IS
A director, shareholder, their relatives, or a business they control.
WHAT TRANSACTIONS ARISE
The company renting premises from a director Buying from a director's other business Loans between the company and an owner Employing relatives Providing services to a connected business
WHY THEY REQUIRE CARE
They are legitimate if properly handled and serious if concealed.
WHAT TO ESTABLISH
That terms are on a commercial basis.
WHY
Transactions on favourable terms transfer value out of the company.
WHAT TO DO
Declare the interest Have the decision taken without the interested director Document the terms Record the transaction
WHAT DIRECTORS' LOANS ARE
Money owed between a director and the company, in either direction.
WHAT TO RECORD
Every movement, with the date and purpose.
WHY
Undocumented withdrawals are treated adversely and can produce tax consequences.
WHAT TO ESTABLISH
Whether the loan is permitted, and on what terms.
WHY
There are restrictions on loans to directors in many circumstances.
WHAT TO AVOID
Taking money and calling it a loan afterwards Running a loan account that only grows Company expenditure on personal items
WHY THAT LAST POINT
It is the commonest issue in small company audits and examinations.
WHAT TO DISCLOSE
Related party transactions in the accounts, where required.
WHY
Concealment is discovered and it is treated seriously.
WHAT TO REVIEW ANNUALLY
Every related party arrangement.
