Director Loan Account - payment of loan before submitting tax return

Director Loan Account - payment of loan before...

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Hi

I think the question should be simple, but I got a bit confused about it after reading different guides.

Opening balance of DLA was nil, and closing balance is £2,000. The amount has been repaid before submitting the accounts to CH and CT600 to HMRC, that is before 9 months after year end passed. Does the interest still need to be calculated and included in the Accounts? 

Thanks

Replies (17)

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By SteveHa
02nd Feb 2016 09:27

What interest?

Has the director agreed to pay interest?

Otherwise, why sweat it. There's no S.455 as paid within the time limit, and no BIK as below £10k.

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By Ruddles
02nd Feb 2016 09:31

Missing info

We've been given the opening and closing balances - anyone  care to hazard a guess at what other info we might need to answer the question?

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By johngroganjga
02nd Feb 2016 10:01

If the loan was made on the basis that the director would pay interest on it, then yes of course the amount accrued up to the year end needs to be calculated and provided for in the accounts.

But as you say the accounts have already been submitted to Companies House you seem to have missed the boat, and I am puzzled as to why you are asking the question after the event.

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Replying to Insolvency Practitioner:
paddle steamer
By DJKL
02nd Feb 2016 10:25

Tentative

johngroganjga wrote:
If the loan was made on the basis that the director would pay interest on it, then yes of course the amount accrued up to the year end needs to be calculated and provided for in the accounts. But as you say the accounts have already been submitted to Companies House you seem to have missed the boat, and I am puzzled as to why you are asking the question after the event.

I possibly (tentative) construe the original post as saying that the loan has been repaid before accounts/CT600  due to be lodged and they have still not been lodged, however it is not very clear

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By pqaccountant
02nd Feb 2016 10:24

Sorry, the accounts have not been submitted yet, I meant the loan has been paid before the deadline for submission.

I got confused by the statement from this link https://www.gov.uk/directors-loans/you-owe-your-company-money

that says:

If you’re a shareholder and director, your company must:

record interest you pay below the official rate as company incometreat the discounted interest as a ‘benefit in kind

You must report the interest on your personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid.

The director did not make the loan on the basis that he will pay interest on it, I just had an impression that he HAS to. As I understand from your comments, I was wrong?

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By Ruddles
02nd Feb 2016 10:30

Potential implications

You might also need to consider possible NI and P11D penalty implications.

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Replying to Paul D Utherone:
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By pqaccountant
02nd Feb 2016 11:08

The loan is below £5k, what

The loan is below £5k, what kind of NI and P11D implications can it have?

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By Ruddles
02nd Feb 2016 11:12

Answer my first response

And I'll tell you

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Replying to possep:
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By pqaccountant
02nd Feb 2016 11:22

Do you mean the date when the loan was made? It was made on 5th month of the financial year.

I am sorry if I am missing something, I am just new in practice and during my first four months I was lucky (or unlucky?) not to deal with DLA at all. 

Thanks

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By Ruddles
02nd Feb 2016 11:26

There are 3 figures that are important

The opening balance, the closing balance and ... ? Go on, have a guess.

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By johngroganjga
02nd Feb 2016 12:14

He only has to pay interest if he has agreed with the company that he will do so. If he is the only shareholder he can make his own mind up.

There can be tax consequences of not paying interest on loans from companies, but not in these circumstances. For a start the loan has to exceed £10,000.

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By Ruddles
02nd Feb 2016 12:25

John

You're overlooking the same point as others, or making an unstated assumption.

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By johngroganjga
02nd Feb 2016 12:32

You mean that it didn't exceed £10K during the year?  Yes fair enough that is what I am assuming.

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By Ruddles
02nd Feb 2016 12:35

Aw, John

You've given the game away. I had hoped the OP would try and work it out for himself.

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By pqaccountant
02nd Feb 2016 14:30

Thanks everyone for your input. Special thanks to John for spoiling the game :) You have been helpful as usual!

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By pqaccountant
02nd Feb 2016 14:32

Last one: I still need to disclose the transaction in the notes irrespective whether it has been paid or not after year end, don't I? 

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By johngroganjga
02nd Feb 2016 14:39

Yes it's a loan to a director!

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