Thanks Dave...

It is too late for tears. Our ignorance has COST us big time. One very good reason to get everything cleaned up.

The way I read the legislation (now), along with your kind advice, is thus:
any "deferred salary" must attract taxes/levies etc. in the month it was accrued. The "deferred portion" can then be paid out to the member later without attracting taxes as it has already formed part of their taxable income for which the various liabilities have been met. The monies loaned for expenses can simply be refunded as is - with the relevant entries of course. We initially kept it out of the books to limit the tax liability; thinking I could tax it later when it became payable - I see now that this is a HEINOUS and COSTLY mistake - not to mention a dubious legal path to follow.

Any ideas as how I can make this work??? I am thinking, as it is a wholly owned family business, that it would be possible for me to construct a new "salary" regime simply for the purpose of getting the monies paid back. I can then reduce the "off-book" loan account by the applicable amount. Whether to split the tax liability between the two parties "off-book" is another question. While legally acceptable, it would attract "school fees" equal to the "higher" tax rate of the individuals being so "reimbursed". THAT is an EXPENSIVE MISTAKE.
While not quite a moral solution, I think that this solution would be a legal one, in that the CC is entitled to pay an employee any figure it cares to regard as fair value for the service the employee provides.

DOH!!!