I need some guidance please.
I am doing a self assessment for a company director. He earns a small salary and takes drawings from the company as and when he wants to. An accountant finalises his year end accounts, I do the day to day bookwork and returns. For 2013/14 the company made a loss, no dividends were given. However, how do I account for the drawings? Surely they should show on the tax return but I cannot figure out where to put it.
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Not declared
Hi,
Drawings are merely a repayment of capital and are not treated as taxable income, therefore no requirement to declare.
A side point would be if the drawings created an overdrawn directors account, there could potentially be P11D implications, which would need to go on.
- P
Nope
As I mentioned previously, it's treated as a repayment of capital. The director is taking out the money they've put in (or income they should have been taxed on).
Hope that helps.
- P
Ignore the above observations that the drawings should be treated as a repayment of capital. In a limited company context that is nonsense.
It is for the accountants dealing wth the company's accounts to decide how to treat the payments you are asking about. How you treat them for the purposes of the director's personal tax return simply follows from that. It is not for you to try and work out in isolation. To deal with the director's tax return, so far as income from the company is concerned, all you need is his P60, his P11D and details of the dividends paid to him or credited to his loan account.
John, I meant in the sense that it's not taxable. I was assuming in my answer that the OP was talking about cash drawings. The taxable element would have come quite rightly from the P60, dividends etc.