Overdrawn Directors Current Account

Overdrawn Directors Current Account

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Scenario 1

A client who owns a limited company, Z Ltd, for which he is a director has an overdrawn director’s current account balance of £10,000 for the year ended 31.08.12. This implies that at 31.08.12 the section 455 charge at 25% on this overdrawn balance of £10,000 is £2,500. The client subsequently repaid part of this loan amounting to £5,000 on 30.04.13 with respect to the overdrawn balance of £10,000 above. How much should the client show as the section 419 charge if the Corporation Tax Return is to be submitted on 31.05.13?

Scenario 2

Mr X has a section 455 charge of £8,000 for the year ended 31.08.11. on an overdrawn director’s current account of £32,000 as shown below:

Directors current account analysis

Opening debit balance at 01.09.10               2,000

Closing debit balance at 31.08.11               34,000

                                                                           ---------

Net increase                                                    32,000

                                                                           ======

The corporation tax return for the year ended 31.08.11 was submitted on 28.02.12 & the full section 455 charge of £8,000 above plus any corporation tax liability has already been paid by 31.03.12.

Mr X then decided to repay back part of the loan (the overdrawn director’s current account) amounting to £16,000 on 31.07.12. How much should be the Sec. 455 claim be for the year ended 31.08.12? By which date should he make the Sec. 455 claim assuming he submitted the corporation tax return for 31.08.12 on 30.04.13?

Thnaking you in advance & looking forward to your responses & assistance in relation to the scenarios above.

Replies (6)

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By Cloudcounter
02nd Oct 2013 17:34

Homework?

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Teignmouth
By Paul Scholes
02nd Oct 2013 18:16

What does that mean?

Cloudcounter - did you accidentally miss out an answer?

Moulud - as the £5K is repaid within 9 months of the year end the S455 liability is on the remaining £5K only, ie £1,250.

The Corp Tax return(extra pages)  will show the £10K and potential tax of £2,500 but will then show the repayment, with date, and claim relief of £1,250.

Just in case....the above only applies if the director is also shareholder and don't forget that, at >£5K, there is the potential of a P11D entry for beneficial loan interest.

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By User deleted
02nd Oct 2013 21:48

Scenario 2

The claim is for £4,000, and should be made by 31 August 2016.

To be pedantic - as is my wont - the claim must be made by 31 August 2016 but I would advise that it should be made by 1 June 2013.

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By Cloudcounter
02nd Oct 2013 21:53

What does that mean?

It means that it crossed my mind that the OP has put a homework question on here, hoping to get somebody to do it for him.

And I didn't accidentally leave out an answer.  It was deliberate.

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By Mouse007
03rd Oct 2013 00:30

It happens

from time to time

 

and it never fails to amaze me that some can not help themselves, they do someone else's homework.

 

Oh well

 

Thanks (2)
Teignmouth
By Paul Scholes
03rd Oct 2013 01:05

Have just checked and....

this page is just called "Any Answers" with no prohibition to students, lazy people or even judgmental plonkers.

Thanks (1)