P11d for Directors Loan, yes or no?

P11d for Directors Loan, yes or no?

Didn't find your answer?

I think I may already know the answer to this question but would like to hear your advice.

We have a director's loan account which is £5000 plus in debit.  Is this a reportable benefit for the P11d form?   My accountant says no.

Replies (15)

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By Peter Kilvington
18th Jun 2014 09:45

Depends

If you are paying interest, at a non beneficial rate, on the loan to you from the company then no.  If you are not paying interest or the rate is beneficial then yes.

Your accountant may well have charged interest to the loan and "forgot to tell you"

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By johngroganjga
18th Jun 2014 09:46

Why do you not trust the answer your accountant has given you? Perhaps it's time to find another accountant, if you have no confidence in the one you have.

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By Taxhurts
18th Jun 2014 09:51

close company? participator?

Is the Director also a shareholder or gets profit related income? (i.e. is it a close company and he/she is a participator?)

Is a market rate of interest being paid on the loan amount? HMRC uses 4% for 2013-14

If your answers are yes and no respectively, it is a reportable benefit on the P11D and must be submitted by 6 July to HMRC.  

If the Director is being paid interest, that is another matter too!

Out of interest, what are the reasons for the No from your accountant?

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By Taxhurts
18th Jun 2014 09:56

sorry my participator comments were aimed at the CT element

forgot to expand on that bit!

Should have said and.....must be repaid within 9 months of the year end otherwise 25% must be paid through CT return.

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Euan's picture
By Euan MacLennan
18th Jun 2014 10:32

Which tax year?

If it is 2013/14, for which forms P11d are due imminently, a P11d will be required for the benefit in kind of paying interest to the company on the loan to the extent that any interest paid is less than the official rate of 4% p.a.

If it is 2014/15, a BIK will only arise on loans in excess of £10,000 and the official rate is 3.25% p.a.

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By FancyFlight
18th Jun 2014 10:33

Thanks, all!   I appreciate

Thanks, all!   I appreciate your comments and my suspicions are (unfortunately) confirmed.

 

And, no, there is no interest paid on the loan amount and it will not paid off within 9 months of the year.   

My accountant's answer on why we should not return a P11d is that it has not been done in the previous years.   Before you ask, the Directors Loan account has been in debt in those years, too.

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Replying to Glennzy:
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By User deleted
18th Jun 2014 10:41

Time for change it is, then

FancyFlight wrote:

My accountant's answer on why we should not return a P11d is that it has not been done in the previous years.  

That is an unacceptable response. It might be factually correct, but it is no excuse for not getting it right now.

"Sir, do you realise you were doing  95mph?"          " So what, Officer -  I've been doing it for years."

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Replying to Glennzy:
By mrme89
18th Jun 2014 10:46

..

FancyFlight wrote:

   

My accountant's answer on why we should not return a P11d is that it has not been done in the previous years.   Before you ask, the Directors Loan account has been in debt in those years, too.

 

Presumably you left your old accountant for the new one for a reason.

 

If the new accountant thinks it is acceptable to not do something just because the old accountant didn’t, quite frankly he’s both crap and lazy.

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Replying to atleastisoundknowledgable...:
Red Leader
By Red Leader
18th Jun 2014 11:54

steady on chaps

If the DLA dr balance is say £5,100, then the bik is pretty insignificant and has perhaps been ignored for that reason. Technically incorrect but an understandable decision.

On the other hand, if the dr is say £30k, then yes it is lazy.

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By johngroganjga
18th Jun 2014 12:06

But surely £5k is just a de

But surely £5k is just a de minimis and not a tax exemption.  So if the DLA is £5,100, interest benefit is calculated on the entirety not just on the excess over £5,000.

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By User deleted
18th Jun 2014 12:13

Different reason

Point taken, RL - if the response had been "they weren't prepared in the past because the benefit was trivial" then, yes, understandable - albeit incorrect. But we can only respond on the basis of what we're told - which in this case was simply following the practice of prior years.

John - even on the full £5.1k, the income tax and Class 1A charges would be small (even if accumulated over say 4 years with some interest and penalties thrown in - total probably less than £1k). Point remains, though, if there was a benefit of any size the it should have been reported. Reliance on previous behaviour alone is no excuse.

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By johngroganjga
18th Jun 2014 12:58

Yes my point was not about how small the benefit was, but because I perhaps misunderstood RL's example to mean that he thought the benefit would only be calculated on £100.

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By bluetone
18th Jun 2014 13:24

Previous Years

Just for clarity if this client came to you and you found out the previous years were wrong, shouldn't you advise correcting the previous years?

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By JimH
18th Jun 2014 23:59

also awaiting answer to bluetone's point
for this common situation with new clients.

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By catalin
25th Sep 2015 15:27

A company has lent money to a director. At the beginning of the tax year the loan amounted to £25,000. No interest is payable on the loan and by the end of tax year 2013/14 no repayments have been made. A taxable benefit has occurred.a) How would this benefit be notified to HMRC?b) What is the deadline for submitting the notification?c) What is the cash equivalent amount of the benefit that F. Sossiphali hasreceived?d) Assuming HMRC were able to collect the tax due on this benefit by adjusting director's tax code for a full year and that she is taxed at 20%, by howmuch would her tax code be adjusted?

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