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Employee change of status

9 months into financial year an employee (sole director and shareholder's daughter) becomes the sole director and shares transferred to her. Prior to becoming a director she accumulated a loan account from receiving monies on top of salary. The same thing happened after becoming a director and therefore has an overdrawn loan account. There are no reserves to pay dividends to clear.

My query is does the loan account prior to becoming a director get lumped together with the post directorship loan with all the tax and interest ramifications etc.

Many thanks in advance for any help you may give

John

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Not a lot has actually changed

The loan that existed before she became a director already had tax ramifications. Her becoming a director is, in fact, a red herring.

The charge to Corporation Tax under S.455 CTA 2010 applies where a loan is made to a participator (shareholder) or an associate (including family members, like daughters) of a participator. So essentially nothing's changed. For S.455 the monies were loaned to the daughter either when she was a participator or when she was an associate of a participator.

The beneficial interest charge applies to employees and directors, so again, nothing's probably changed, although the initial benefit may be chargeable on the parent, on the basis that the loan was originally made by reason of their directorship. The total amount of benefit to be assessed and charged to Class 1A NIC is the same though.

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