Share this content

Director/shareholder loan write-off

Director/shareholder loan write-off

A client company has two shareholders and one director. The director holds 95% of the share capital and is the only active shareholder.

There is a loan to the director which the company now wishes to write off.

I am aware of the tax consequences but wonder if anyone can shed any light on the company secretarial and company law aspects.  I asked a corporate lawyer contact of mine who rather strangely suggested he had never seen such a situation before!

Does the loan write-off require just a board meeting or should there be a shareholders' meeting also?



Please login or register to join the discussion.

By taxguru
22nd Feb 2013 12:19

Shareholders' resolution in this case is meaningless when the director is a 95% shareholder. S 197 - 214 of CA 2006 deal with loans to directors.

You might want to make adequate disclosure of transactions with the directors considering this

You might also want to check s175 - duty to avoid conflict of interest.


Thanks (1)
22nd Feb 2013 12:50

This might help

Write off loan

s455 tax is repaid to company 9 months after the accounting end date in which the loan is written offIf the director is a participator in a close company, the loan is treated as a distribution grossed at the dividend tax rate (s415 ITTOIA 2005). Declare it on the Box 13 Additional Information pages on the directors personal tax return; the director is liable to higher rate tax if appropriate.HMRC’s view is that the write off is earnings and Class 1 NIC should be accounted for (CWG2 (2010) page 82 and National Insurance Manual 12020); try to argue that write off made to the individual in his or her capacity as shareholder, not as employee.No Corporation Tax return deduction for the write off (s321A CTA 2009 as inserted by FA 2010 s4)3)It’s advisable to make a note to the accounts to formally waive, otherwise technically the liability will remain.No charge if write off occurs on death 

>>. from article: Directors Loan accounts: get the details right - link below... 

Thanks (1)
Share this content