husband & wife directors

husband & wife directors

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A slightly different take on the old question of director loans & S419 tax

Company has 2 directors - husband & wife - the husband runs the bookeeping as well as running the business, however the wife is also director - allbeit in name only

Question 1

One director loan account is run - at yearend £11.5 overdrawn. This was reduced to £6k by the time I was given books due to a repayment - still over the £5k limit to avoid s419 & BIK

Given the director is running the loan account on behalf of both directors & cash withdrawn benefits both - could I split the effective loan in 2 and therefore show only £3k outstanding each within 9 months of the yearend & avoid s419 ?

Question 2

A £7k dividend was declared in the year (after calculating it was OK) & entered onto self assessment returns - by the end of the accounting year there were cummulative losses.

Should I change the status of this dividend & re-charge it as an additional director loan ?

Thanks
Simon Mann

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By stephenkendrew
06th Sep 2007 10:43

s 419 tax
Q1.

I think you are mixing up the s419 and benefit in kind rules.

There is no £5,000 limit when it comes to section 419 tax.

So the total directors loan of £6,000 will attract tax at 25% unless it has been repaid within 9 months of the company's year end.

Splitting the loan between the 2 directors won't make any difference to the s419 tax but could avoid a benefit in kind charge. However, the overdrawn balance was £11.5K at the year end so the £5,000 (each) limit has already been exceeded.

Q2.

I don't like the idea of rewriting history.

The dividend has been declared (apparently after calculating that the company had sufficient profits to do so) and entered on tax returns.

You cannot change that.

The fact that the company made subsequent losses doesn't make the dividend illegal.

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