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Splitting Directors O/drawn Loan A/c

Splitting Directors O/drawn Loan A/c

Have Ltd co with y/e 31/03/12, 2 directors Husband & wife, both Basic rate tax bands have be maxed out with divdiends & paye.

Despite my best efforts the husband continues to pay some private exps through Ltd co, and lift ATM cash via the comapny credit card.

As a result the directors loan a/c stands at £7K o/drawn.

No P11d has been completed by the Ltd co.

My question is this, Is it possible to allocate 50% of the personal exps to the wifes directors loan a/c, therefore bringing the loans o/s below £5K each, avoiding any requirement to file P11d and no penalties, and clearing the 2 o/d loan a/cs by way of creating a dividend dated 31/12/12.

Also avoiding additional tax on the o/s loans and disclosing on CT600

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11th Jan 2013 09:43

It is a question of grammar

You refer to a directors loan, but do you mean a director's loan or a joint directors' loan?

 What do the accounts to 31/03/12 disclose?  If it is a joint directors' loan, you have no problem with the £5,000 threshold for a BIK.  If a director's loan in the sole name of the husband, you could accrue interest at the official rate of 4% p.a. and subsequently pay it by way of a dividend not taken entirely in cash.  Oh!  No, you cannot, assuming that the accounts have been filed by the due date of 31/12/12.

The s.455 25% tax charge applies to loans to shareholders, not to directors.  Are both husband and wife shareholders?

I don't like the sound of "creating a dividend dated 31/12/12".  Retrospective paperwork for money actually drawn may be acceptable, but re-writing history is not.  Have you done any sort of management accounts for the 9 months to 31/12/12 to confirm that there are sufficient profits after tax, when combined with the retained profits in the accounts to 31/03/12, to cover the dividend you propose?

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11th Jan 2013 10:28

Excuse my poor England Euan, did not have my morning coffee fix!

Yes both H & W are shareholders, management acc's show healthy profits to 31/12/12 and retained profits at 31/03/12.

Abbreviated acc's have been filed with CH on time, showing Director's Loan  bal of £7K,

Agreed with the H & W prior to 31/12/12, that a dividend would be proposed to clear the o/drawn acc's and disclosed on SA returns 2012/13

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11th Jan 2013 11:06

In that case ...

You will still have to fudge the interest charge to avoid the husband's BIK.  It should have been included in the accounts to 31/03/12, but you will have to put it through as on 01/04/12 and include the interest income in the company's accounts and CT600 for the year to 31/03/13.

Then, you need to pay the wife the full amount of her dividend declared by 31/12/12, but pay the husband only the balance after deducting the interest charged.  At the same time, I would calculate the further interest due for the 9 months to 31/12/12 and deduct that from his dividend payment in order to avoid the need to prepare P11Ds for 2012/13.  Obviously, the full amount of the dividend will be disclosed on the husband's 2012/13 tax return.

And you had better make the dividend sufficient (or declare a further one) in order to put the husband's DLA (I have assumed that it is the husband, rather than the wife, which I suppose is sexist) well into credit to allow for his propensity to treat the company's money as his own.

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11th Jan 2013 11:14

Many thanks Euan

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11th Jan 2013 11:49

Going Forwards

You might want to think about changing the year end so that your nine months after year end falls after the following 5th April. You can then at least use part of next year's dividends to clear any balance.

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11th Jan 2013 11:59

I have only recently changed the y/e to 31/03 in order to try and tax plan better regarding dividends, but i have no knowledge of the personal items until i receive the books to do the y/e acc's.

Euan, as i have not yet filed the acc's to 31/03/12 with HMRC, could i not include the Interest income & charge now?

Would this raise any issue's with CH

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11th Jan 2013 12:49

No!

You should only have prepared the abbreviated accounts for filing at Companies House from the full ones prepared for the shareholders and required by HMRC.  You must not now amend the full accounts after filing the abbreviated ones.

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11th Jan 2013 13:40

Again many thanks Euan

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11th Jan 2013 15:30

Euan

Such good answers!

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