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Directors Loan Accounts and P11Ds

06/04/11 -  £2,000 overdrawn

30/05/11 - £10,000 o/d

30/6/11 - £1,000 in black

30/8/11 - £1,000 o/d to end of year

Ignore up to 30/5/11 as under £5,000. 

Entry for 30/5/11 to 30/6/11 when loan paid off

No further entries?  Or 30/8/11 -> as there was a loan over £5k in the year, even if this wasn't this loan specifically.



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Two loans

You don't ignore 6/4/11 to 30/5/11.  There's a loan benefit if the loan exceeds £5,000 in the year.

I assume that the first loan was still £10k overdrawn immediately prior to repayment.  In that case it's (£2,000 + £10,000)/2 x 2/12 x 4% = £40. For the two complete months it was outstanding. An actual calculation will probably give you a worse result.

30/8/11 is a new loan and it hasn't exceeded £5,000 in the tax year.

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08th May 2012 16:02


Steve Kesby wrote:

I assume that the first loan was still £10k overdrawn immediately prior to repayment.  In that case it's (£2,000 + £10,000)/2 x 2/12 x 4% = £40.


As a side point, I always find this interesting (now you have reminded me of it!).  So if I wanted to manipulate the P11D benefit, how about I pay back all but £1 of that £10,000, then the last £1 the day after?  That changes the calc to £6.67 in one easy move.

Or would HMRC look at the 'amount before loan was cleared - £1' box and insist on the daily method? :)

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08th May 2012 15:41


I should have said these are made up figures so you don't need to calculate anything, but thanks.

So, the period 06/04/11 to 30/6/11 is a loan, it exceeds £5k, so it is used. The £1k later is a new loan, it doesn't exceed £5k, so it is ignored.  Thanks!


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Yes but...

... the calculation's important, because the the point to note is that the amount to use in the averaging calculation is the balance immediately before the loan is repaid.

So if your £10,000 o/d balance was repaid £9,999 on 29/6/11 and £1 on 30/6/11, the calculation changes to (£1,000 + £1)/2 x 2/12 x 4% = £3. Now there's a handy tip! but HMRC have the option of going for an actual calculation too.

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08th May 2012 16:16

Exact method

Since the loan would have been in place for a short period, and the P11D will report the maximum balance, I would expect any alert person at HMRC (if there are any left) to have a look at it.

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In your example

My rough calculation gave a benefit figure of £46. The "manipulated" calculation gave a figure of £3.  Even if the benefit falls in the £100,000 to £114,950 effective 60% rate band, that's a tax loss of only £25.80, so I doubt you'd get any fuss.

With larger figures, they ought to spot it as BKD says. It's all done on one of those clever computer things that ought to produce just such an exception report, but practice and theory do differ. HMRC are nothing if not unpredictable.

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08th May 2012 16:41

beware of

bed and breakfasting on the loan account


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08th May 2012 21:09

here's one

Here's one I had a discussion about with one of my early clients more to do with corporation tax than P11d:

He owed over £5k at the year-end and was clearing it with expenses claims, but also building it up with cashpoint visits.  He'd had £10k of travel claims, salary and divis in the first 3 months but also had £10k of cashpoint and other withdrawals.  In his view there was no corporation tax to pay as the £5k had easily been cleared within the 9 months even though the balance was still around the year-end level.

His previous accountant had fallen out with him over this issue amongst others.  They considered he'd not cleared any of the loan account.  My client argued it was like a credit card, and these entries had cleared the initial £5k.  I could see nothing in the BIMs to contradict this.

Luckily I don't have any clients doing this sort of thing at the moment.  I've seen conflicting posts on the net about it, and had conflicting views in discussion with other local accountants.


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@ Mr Mischief

Let me nail that one for you.

The £5K limit is entirely irrelevant to the Corporation Tax payable by virtue of S.455 CTA 2010 (formerly S.419 ICTA 1988), and you won't find any detail in BIM that relates exclusively to Corporation Tax (that's the job of the CTM).

Any client that thinks they know more than you is always a good drop though.

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08th May 2012 22:21

I did not mean that
Let's call the balance X then. it could be £5k, £50k or £500k. It is still X 9 months after the year-end. But in the meantime entries worth X have come in - be they expenses, or whatever - and entries worth X have gone out in cash point and bank transfers to personal accounts.

His previous accountants were declaring X as the section 419 amount. Is this correct? I say it is not, that the original balance X has been cleared and a new balance has been built up within the 9 months.

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Are you saying that the man has a £500K loan and spends 4.5 months repaying it and then spends 4.5 months withdrawing a further £500K? or are you saying that some days he makes a net repayment and others a net withdrawal?

On the day that he pays in £10,000 and withdraws £20,000, he's made a net withdrawal of £10,000 (he hasn't repaid £10,000). If he'd paid in £30,000 and withdrawn £15,000, he's made a net repayment of £15,000 (not £30,000).

It's a fluid loan in that respect. If the balance at the year-end is £500K, what's the balance 9 months later? That's the repayment or withdrawal within nine months of the year-end. That's also how you determine whether there's a further advance to report at the next year-end. S.455 is charged by reference to (essentially net) advances in a CT accounting period and repayments should be similarly viewed, in my opinion.

The only time an alternative argument exists is if at some time during the 9 month period the loan is reduced to nil.  Then you need to consider the bed and breakfasting point raised by carnmores, ie was the repayment genuine, or was it just replaced with another loan a short time later.

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09th May 2012 10:56


George Attazder wrote:

The only time an alternative argument exists is if at some time during the 9 month period the loan is reduced to nil.  

I disagree (in part) George. It will depend on the precise circumstances, and how likely the application of bed and breakfasting rules. But HMRC are clear on this - in absence of any contrary instruction from the taxpayer, credits to loans are to be applied on a FIFO basis. There is no guidance (that I can find) that says you must compare the balance at the year end with the balance 9 months later. The question is simply whether or not the year-end balance has been repaid within 9 months. Say my client has a year-end balance of £50k and 2 months later repays £25k of it. If, 6 months later, he draws a further £40k, that will not affect my calculation of the s455 tax, which will  be charged on a balance of £25k - because £25k of it was repaid within 9 months. Even if, before repaying the £25k, he withdraws a further £25k the FIFO rules would still treat £25k of the year-end balance as having been withdrawn. (Subject of course to the actual timing - if £25k was withdrawn and £25k repaid a day later, I suspect HMRC may raise a question or two.)

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Humble opinion

I agree with BKD

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Bah humbug!

And humble pie. I accept the point.

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09th May 2012 13:00

Glad to see it was not just me!

this was 2 years ago.  I originally advised the client as per George and the client's previous accountant, then started trawling through handbooks, websites, HMRC and so on.  I was looking for a specific section of Tax Law rather than just what woolly and confusing language - and sometimes just plain contradictory - you can find on the HMRC site.

I could not find any.  Hence I was prepared to sign off the client's view, that the orginal balance was cleared off and there was nothing to declare.

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09th May 2012 14:08


I should point out, my second post was made before I saw Steve's second post, so we both clearly had the same thought at the same time about 'fiddling' the balance just before pay off :)


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16th May 2012 11:35

P11D - Woksheet WS4

Try the HMRC loan worksheet


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16th May 2012 12:33

why not charge interest and avoid the BIK

I always have the company charge interest at the official rate on any director's loan that goes over £5,000 at any time during they year.

That way there is no benefit in kind and nothing to disclose on a P11d -- or am I missing something here?

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By CaroSuz
16th May 2012 18:08

but is there a CT liability for the company?

How does that work for the company's CT return? Why not CT of at least 20%?

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16th May 2012 18:55

CT liability

Yes, there's a CT liability - but fairly minimal.

The Interest income at the CT rate - i.e on a loan averagin £20,000 - interest at 4% and CT at 20%, the charge is only £160.

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By Alf
17th May 2012 10:06


I think CaroSuz was asking would there not be a s455 charge at 20% on the loan balance at the year end (if it's not repaid within 9 months)?

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