Hi there! Any replies highly appreciated.
I have a lorry driver with a private ltd, who has no other source of income and has been continuously withdrawing cash to pay for private expenses. Salary was set as £700 per month. As a result there is an overdrawn dla of £30k for the last almost 2 years (8k & 22k respectively). He can't repay the loan. The first 8k borrowed in 2017/18 was included in the self assessment return in January 2019 and tax is being paid on this.
The business has small amount (5k) cash but a lot of profit.
Can a dividend of say 35k be issued in March 2019 to clear the director's loan account - 30k offset in the books against dla and 5k paid out in cash to cover his expenses in the next couple of weeks. If I am right thinking this way;
1. There would be no s455 tax due as the loan is repaid within 9 month of the accounting reference date - 30th September 2018
2. An amended SA return can be submitted to reclaim the tax paid on the 8k, income tax will be due on the dividend in January 2020
3. Corporation tax will be due on company's profit in June 2019 (19%)
4. Should the company charge interest on the loan? Are there any extra reporting obligations if the loab is repaid? Thanks