Director Loan or Dividend

Can a Director be paid a dividend if he has an in credit Dir Loan or should this be repaid first

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A client has a substantial in credit Directors Loan Account and is planning to apply for a mortgage in the future.  He is taking a salary of £11000 but wishes to take a dividend to show a higher level of income to his mortgage adviser (SA302's).  Does the Director need to have the Directors Loan repaid to him before he is able to take a dividend.  I am aware it may be  more tax efficient to take the Directors Loan first but is it unlawful to take a dividend. 

Replies (10)

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By Ruddles
25th Nov 2016 15:01

Absolutely not unlawful. The balance on the DLA - positive or negative - has absolutely nothing to do with the company's ability to declare a dividend. And it should be worrying for the client that you think that it might.

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paddle steamer
By DJKL
25th Nov 2016 15:12

The key, for the dividend payment process, is distributable reserves-does the company have any or is perhaps the credit balance loan account an indication that there are actually no reserves to distribute?

I also agree with Ruddles, it is a very worrying question for you to be asking on behalf of a client.

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RLI
By lionofludesch
26th Nov 2016 09:37

What a strange question!

The implied deceit of the mortgage adviser is also a cause for concern.

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avatar
By tadixon58
28th Nov 2016 11:12

Thank you for confirming something that I already knew to be true. The moral of the story is do no listen to an IFA who thinks he knows more than you do or you end up looking like an idiot.

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Replying to tadixon58:
RLI
By lionofludesch
28th Nov 2016 12:20

Oh - it's the IFA who suggested that ?

Well, it shouldn't be too difficult to pull the wool over his eyes. He'll believe anything.

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Replying to tadixon58:
RLI
By lionofludesch
28th Nov 2016 13:18

Duplication again ....

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Replying to tadixon58:
Stepurhan
By stepurhan
28th Nov 2016 12:41

tadixon58 wrote:

Thank you for confirming something that I already knew to be true. The moral of the story is do no listen to an IFA who thinks he knows more than you do or you end up looking like an idiot.

Here's a handy tip.

If you only say you knew something all along AFTER it has been pointed out how foolish it is, your claim lacks credibility. In future, include in your OP "an IFA has told my client this, but I am sure that is wrong".

A moment of self-doubt because you have been challenged by an IFA speaking with certainty is one thing. Repeating that challenge as if it is your own view that you are checking just makes you look bad.

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Portia profile image
By Portia Nina Levin
28th Nov 2016 12:29

New low water line.
<--------------------------->

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Time for change
By Time for change
28th Nov 2016 16:13

This is a clear case where the recommended advice, to rotate crops, is essential.

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Red Leader
By Red Leader
28th Nov 2016 20:09

May I suggest you visit our sister site, accountingweblite.co.uk.

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