Director's loan account

Director's loan account

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Hi, I'm just looking for some practical views on what is possible in the following situation. A sole shareholder / director company has an overdrawn directors loan account which has arisen due to cash withdrawals and personal payments made for rent, utilities etc which were made directly from the company's bank account. I have just taken on the client and am trying to clean things up a bit. We've still got a bit of time to avoid the s455 charge however as the loan balance is approx 70k then I am looking for ways to reduce the subsequent income tax charge on payment of a dividend. Going forward I have suggested that he gives shares to his wife so that we can use her basic rate threshold, however is there anything that we can do with the current loan balance if he gives the shares to his wife now, or is it a case that as she was not previously a shareholder or director then the loan balance outstanding can only be cleared to the existing director even though in fact the amounts taken out were used for joint purposes? 

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By julie.severn
29th Nov 2012 11:36

Could the loan be divided anyway?  She wasn't a director so it wouldn't be a director's loan and it is, in truth, half her debt.  A loan to a third party (albeit connected).

Not sure of the techniclaities, just an idle thought.

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Replying to lionofludesch:
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By charlb
29th Nov 2012 11:49

Hi Julie - Thanks for your response. Yes ideally I would like to split the loan however I'm not sure how doable this is given that the rental and utility contracts are in the director's name, though of course his wife lives in the house with him. Any takers?

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