Earnings for NI or not?

Earnings for NI or not?

Didn't find your answer?

I have a director shareholder who has recently had an overdrawn loan with the company written off and charged to tax under the provisions of sec 421 TA 1988 and treated in much the same way as if it were dividend income.
For National insurarance purposes it appears HMRC are reliant on Sec 3 of the 1992 Social Security act and will treat the loan waiver as earnings such that there will be a charge for the employer of 12.8% and 1% for the director who has other earned income over and above the upper earnings limit.
Has any reader succesfully argued that a loan waiver in such circumstances is not to be treated as earnings.
Think i am clutching at straws but would apprciate any comment.
Thank you
Michael Chaffe

Replies (1)

Please login or register to join the discussion.

avatar
By Paula Sparrow
31st Jul 2006 13:13

Waived or repaid by dividends?
The question is slightly confusing. Either the loan is written off, in which case tax and National Insurance charges apply; or it is repaid by way of dividend, in which case National Insurance does not apply.

If you are taking the dividend route, you will need to make sure that the corresponding dividend is paid to all other share holders and the appropriate paperwork is in place to make it a valid dividend.

Thanks (0)