Directors overdrawn loan account

Directors overdrawn loan account

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A director's loan account was overdrawn at the year end (31 March 2007). A dividend was paid six months later (30 Sept 2007) which cleared the O/D balance at the year end. We did not update the DLA to check the balance when the dividend was paid (it was overdrawn by a larger amount than at 31 March).

HMRC are now saying that the as the dividend did not clear the balance at 30 Sept 2007 when it was paid s419 tax is due on the amount which remained outstanding at 31 March 2007 ie the dividend is used first to repay the increase in the balance between 01/04/07 and 30/09/07 and the to reduce the balance at 31/03/07 .

Notional interest on the DLA has been calculated & included in the accounts.

FCA

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By User deleted
21st Apr 2008 11:33

Thanks Stephen
You've stopped me thinking "Is it really worth it?"

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By stephenkendrew
21st Apr 2008 11:06

Rule in Clayton's case
I think HMRC are wrong!

Check this out: -

http://www.hmrc.gov.uk/manuals/eimanual/EIM26261.htm

"If the borrower does not make an allocation when making payment .... treat each successive repayment as allocated against the oldest outstanding borrowing."

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