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Loan to Employee/shareholder who is not a Director

Loan to Employee and shareholder who is not a Director

I am trying to understand the rules for Directors loan and who this should be reported against. 

A family business which is a close company is taking a directors loan for the main director and a second loan for the wife who is a employee and shareholder.  

From the company point of view it is clear the S455 applies to both loans https://www.gov.uk/hmrc-internal-manuals/company-taxation-manual/ctm61505

However from a personal point of view as the wife is not a director, does her loan get reported against the director her husband as she is receiving the loan as a connected person to him. 

Or would the loan get reported in her own P11D?  I am trying to find some legislation to state the correct treatment. 

I am unclear if the wife's loan as an employee and shareholder still gets reported against her personally or will both loans go on the directors P11D.   

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27th Feb 2019 15:50

As she is an employee, the presumption is that she is obtaining the loan by reason of her own, and nobody else's, employment.

Connection, associates etc tend to be of relevance only where the recipient of the benefit is not a shareholder/employee/officer in their own right.

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27th Feb 2019 15:57

S174 ITEPA is where that presumption is made.

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27th Feb 2019 16:25

You don't get a charge because you're a director.

You get a charge because you're a shareholder (or participator).

Which, I think, answers your question.

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to lionofludesch
27th Feb 2019 16:44

It answers the question about the section 455 charge, but not the P11D benefit charge!

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to Wilson Philips
27th Feb 2019 17:06

True.

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27th Feb 2019 16:34

Thanks, seems like i was trying to over complicate it.

Is there anything else to be aware of or are there no further complications. It will be repaid by declaring a dividend in around 6 months time.

And out of interest, would it be the same answer if the wife was not an employee and only a shareholder?

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to cabriochris19
27th Feb 2019 17:06

Of course it wouldn't be the same answer. If the wife is not an employee there can be no assessable employment-related benefit in her name. In that case the charge would fall on the husband. (There could be a charge on the wife under section 1064 of CTA 2010 although benefit in kind charges normally trump section 1064 charges.)

Correction - I should have read section 1065 of CTA 2010 first. It seems that in the case of loans, the section 1064 charge would in fact fall on the wife.

The section 455 treatment would be the same, though.

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to Wilson Philips
27th Feb 2019 17:19

I read s1065 as disapplying s1064 if the person benefiting (the borrower) is the spouse of an employee.

So I thought you were right first time round.

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to Tax Dragon
27th Feb 2019 18:10

I read section 1065 as disapplying section 1064 (in respect of loan benefits) only where the person benefitting is employed. The spouse over-ride seems to apply only where the benefits relate to accommodation or pensions etc.

We can't both be right (although I suppose we could both be wrong!)

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to Wilson Philips
27th Feb 2019 18:56

Yes I retract and concur.

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