Share this content
14

company charging director on overdrawn balance iss

company charging director on overdrawn balance issue

Didn't find your answer?

Hi
if a company charges the director interest on overdrawn directors account (bal. over £10k), does the company get away with P11d and NIC1A, whilst the director gets away with BIK declared? Are there any admin procedures or anything one owes to know? thanks. 

Replies (14)

Please login or register to join the discussion.

By johngroganjga
21st May 2019 16:06

If the debtor pays interest on his borrowing at or above the rate set by HMRC for this purpose there is no taxable benefit, and therefore nothing to be reported on a P11D.

Thanks (0)
avatar
By Tax Dragon
21st May 2019 16:06

Can you clarify what you are asking?

If you mean: loan is £10,001, £9,999 is interest free and £2 is interest bearing then... no. Just, no. (Read s180 ITEPA.)

Thanks (0)
Replying to Tax Dragon:
neand
By neanderthal
21st May 2019 16:08

i meant charging interest on the whole amount.

Thanks (0)
Replying to neanderthal:
avatar
By Tax Dragon
21st May 2019 16:20

I am not a fan of charging "interest" after the event. DLA is o/d £5k in year 1, £11k in year 2, £5k in year 3. "Interest" is charged only in year 2, on the full £11k.

What sort of commercial loan behaves like that? Is the "interest" interest?

That said, you'll "get away with it" 99 times out of 100. (Although, like Lion, I think that an odd turn of phrase.)

Thanks (0)
RLI
By lionofludesch
21st May 2019 16:12

Provided the interest is at least the statutory rate, neither the company nor the director is "getting away" with anything.

There is no benefit to declare. The director has paid more in interest than he would've done in tax had there been no benefit.

Thanks (0)
avatar
By andy.partridge
21st May 2019 16:23

Admin procedures?

Er, you'll want a contemporaneously prepared agreement between debtor and creditor.

Thanks (0)
Replying to andy.partridge:
avatar
By Tax Dragon
21st May 2019 16:29

Yeah, that's what I meant, but you've said it more posh, like.

Thanks (1)
Replying to Tax Dragon:
avatar
By andy.partridge
21st May 2019 17:50

If a client is wavering I throw in 'contemporaneous' and it generally hooks them. After all, what kind of idiot would use a word like that if they didn't know what they were talking about?

Thanks (1)
RLI
By lionofludesch
21st May 2019 16:39

I'm not sure why an OMB would want to charge its director interest.

It's just retains funds in the company which the director probably reckons will be better in his pocket anyway.

Plus these are generally trivial amounts we're talking about.

Thanks (0)
Replying to lionofludesch:
avatar
By andy.partridge
21st May 2019 18:11

I would guess that it's wholly and, possibly, belatedly an attempt to avoid preparing and filing a P11D and P11D(b).

Thanks (0)
Replying to andy.partridge:
RLI
By lionofludesch
21st May 2019 18:25

Probably. More trouble than it's worth.

Thanks (0)
Replying to lionofludesch:
avatar
By andy.partridge
21st May 2019 18:57

I'll go further and wager that the filing deadline was 6th July last year.

Thanks (1)
Replying to andy.partridge:
RLI
By lionofludesch
21st May 2019 19:06

What odds are you laying ?

Thanks (1)
Replying to lionofludesch:
avatar
By andy.partridge
21st May 2019 19:11

I'll lay eggs if I'm wrong.

Thanks (1)
Share this content