Overdrawn Directors Loan Account

Overdrawn Directors Loan Account

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New Ltd Co client, 1 director/1 shareholder, accounts prepared for y/e 31.3.03 with overdrawn loan account circa £30k, no meeting to declare dividend.

(i) Have no intention of backdating meeting declaring dividend, why can't it be dated now (and posted in accounts), using argument that dividend not ascertained until accounts prepared, which is now?

(ii) If (i) not an option, can loan not be written off under S.421? Would writing a loan off need the same kind of documentation as declaring a dividend? Any other ramifications of w/o loan?

The circumstances are the same for y/e 31.3.04, which will presumably mean two S.419 taxes of £30k x 25% = £7,500, due 1.12.04 and 1.12.05. If the loan cannot be w/o until now (i.e. current y/e 31.3.05), tax won't be refunded until 1.12.06.

Any help/advice gratefully received, thanks.

nick

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By User deleted
23rd Feb 2005 13:01

Proposed dividend
A dividend voted now based on the profits for the year is credited to a "Proposed dividend" creditor in the accounts. Hence the directors loan account remains overdrawn and the dividend goes on the individuals tax return for 2004-05.

If this was hapening before 31 January then the accounts would be the same but the fact that a dividend has been paid to clear the overdrawn loan account would be reflected on the CT600 and there would be no s419 tax. (although a benefit in kind on the overdrawn loan acccount would be due)

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