Directors Loans

Directors Loans

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I have a H&W Ltd Co. He owns 51 %, she owns 49%.  He's an IT contractor.  Despite my advice the Ltd Co bank account is used for many personal transactions and the Dir loan is always an issue.  When this was set up there was only one directors loan account and all H&W trans were lumped into it. For example the personal car payments, the £5k DD to their joint account..etc. I have advised against it but the Director is unwilling to change.  In this instance would you allocate all of the H&W declared dividends to the Dir Loan OR try to split the monthly expenditure between H&W and run two dir/SH loan accounts.  Please note the wife is not a director.  Its so messy and I suspect a risky client as a result.  Any advice?

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Euan's picture
By Euan MacLennan
07th Jan 2014 14:22

If it's so messy ...

... you have no chance of splitting the joint expenditure and getting the husband to agree to your split.

I would run just the one loan account, but get both H & W to certify the balance outstanding at the end of each year.  Disclose it properly as a related party transaction saying "... the director, J Bloggs, and his wife".  s.455 tax on an overdrawn loan account is not a problem as both are shareholders.  Accrue and pay interest at 4% on any overdrawn balance to avoid the BIK.

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