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Dividends & Director's Loan Account

Client withdrew different sums at different intervals last year and declared dividend on 31/03/2011(last day of the company's accounting period).  Dividends were processed through an entry reducing the director's loan account.  Is this allowed as I believe the interest payable on the dir loan is an empl benefit even if the amounts are minimum.  Am I correct in my understanding ?

Thanks

Mohammed.

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16th Aug 2011 11:44

This is allowed

However, interest should still be calculated on a daily basis assuming the overdrawn loan account exceeds £5000 at some point during the tax year.

 

However, I understand there can be problems with evidencing the actual payment of an interim dividend in this situation. Never known this to be a problem in practice though.

 

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