Clive,

That’s correct; the husband is not a remunerated employee of the CC. He has a full time job at a company from which he earns a salary. The business is “something on the side”. His wife is the only member of the CC. She does the basic admin functions for the CC and he oversees the operation.

As you said, the primary issue is dealing with the substantial debit loan account and the “withdrawals” from the CC. As you rightly say it is extracting income without declaring it and paying the requisite tax on it. I’ve tried explaining that concept to the husband but he doesn’t seem to grasp it and I don’t know how else to explain it to him or maybe I’m just not good at explaining it.

I’ll have to crunch some numbers and probably use a combination of the solutions. I was thinking of redeeming the loan over a period of time instead of “one go”.

No, I’m not the accounting officer of the CC. At this stage they don’t have an accounting officer. I’m a part time bookkeeper. I complete the bi-monthly VAT returns from the bank statements they provide me and the monthly PAYE returns. They've asked me to compile an Income statement and Balance sheet for the 2012 financial year for which the tax return is due at the end of this month. Their business income and expenses is fairly straightforward, it’s when they mix personal expenses and business expenses that things start to get murky.