When is DLA repaid

When is DLA repaid

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Overdrawn directors loan account of say £10,000

Cleared by final dividend of £10,000 within 4 months.

Accounts and CT return prepared and submitted 6m after year end on basis that loan repaid within 9m and no s419 'tax' due with entries made on CT600A to reflect this.

Subsequently discover that DLA has become overdrawn so that by due date for CT of 9m after year end balance is say £10,000 again.

Issue?

Is it the fact that the loan balance as stated at year end has been repaid at some stage within 9m of y/e which is significant, or the balance on the loan account at the point 9m after y/e which is important?

If the former then I assume you treat repayments as paying down the loan balances on a FIFO basis, so to speak?

And if the latter then surely there are going to be a lot of revised CT600s necessary?

Many thanks for any guidance. Have read the legislation and the procedural manuals.

Matthews

Replies (3)

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By User deleted
05th Jun 2008 13:23

Thank you
both for your guidance - much appreciated.

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By Peter Cane
05th Jun 2008 09:34

Clayton's rule
Agree with Dave.

In the event of a Revenue challenge, quote them "Clayton's rule" and refer them to their Employment Income manual http://www.hmrc.gov.uk/manuals/eimanual/EIM26261.htm

Although it is more in the context of P11D beneficial loans, the principle should still apply for Section 419 liabilities

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By Dave Paveley
05th Jun 2008 08:13

It has been repaid

A director can write a cheque to the company on day 1 to repay a loan and then write a cheque back to himself to start a new loan. The original loan has been repaid and hence no S.419 tax.

In your case if the loan was cleared by a dividend then it has been repaid. If a subsequent loan is advanced then that is a problem for next years accounts. No adjustment to the CT600 is necessary.

You should note that in the first example I gave a physical payment must be made. It is insufficient to just 'say' the loan was repaid and a subsequent one advanced.

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