I realise directors' loans have been done to death but can't quite see the answer to my situation amongst all the previous advise.
Sole director/shareholder has loan over just over £500 outstanding at year end (31 Jan). He has now decided he is never going to pay it off and wants it written off. I am in the process of finishing last year's accounts & his personal tax. New accountant will be dealing with current year. Insufficient reserves to declare a dividend. He doesn't want it as a bonus (& frankly to late now to put it in last year to clear year end balance to zero).
If I write it off at 31 January I am concerned of NI issues with payroll year end already closed.
Am thinking of leaving it as loan in 31 Jan accounts & telling new accountant that he needs to deal with write off in current year. Then NI, if appropriate, gets dealt with in correct PAYE period.
But where does this leave me for s455? If I assume it will be written off then presumably I don't need to worry about it. But what if new accountant doesn't write it off for whatever reason & loan still exists in 9mth+1day - then I should have included in corp tax return & paid s455.
Advice/suggestions on how I should deal with this unknown future situation would be most welcome?
Or is there a better way altogether that I've overlooked?
Thanks
Replies (3)
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Can I just clarify...
.... did you really say that the loan was £500? Sorry, just over £500?
Clear client instructions required
Get the client to give clear instructions in writing.
If those written (or eMail) instructions say "The loan will not be repaid" then a s455 tax liability arises (even though loan less than £5,000 - the £5,000 limit refers to beneficial loan BIK rules, there is no de minimus limit to s455 liability and reporting on CT600A).
Even though the loan is "only" just over £500 form CT600A is required to be completed. This is very important.