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Overdrawn Director's Current Account

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Company X has a year-end of 31.01.19. The director’s current account was overdrawn as at 31.01.19 and he has 9 months from this date to pay back the loan in full/part to avoid/reduce any Section 455 charge.

The director is paying back the loan gradually within the 9 month time frame after the end of the financial year of 31.01.19. Recently as at August 2019 he has repaid some of the monies back into the business but is still overdrawn.

So far the company’s accounts have not yet been submitted as the Section 455 charge is liable to change once the director makes further repayments into the business bank account.

Currently we are updating the bookkeeping regularly after the year end of 31.01.19 to reassess the level the director’s account is overdrawn by.  Generally the Section 455 Charge can be reduced by credit entries in the director’s account such as expenses paid from personal funds, salary journals and by paying a higher level of dividends post the year end above.

My question in relation to the above scenario is as follows:

Should we wait until the last minute where it is almost 9 months after the year end and submit the accounts once we have re-assessed the level the director’s account is overdrawn by?

What other strategies do other accountants use?

 

Replies (6)

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By Wanderer
27th Aug 2019 10:41

RaccW wrote:

Should we wait until the last minute where it is almost 9 months after the year end and submit the accounts once we have re-assessed the level the director’s account is overdrawn by?

The 'last minute' to submit to HMRC is 12 months after the year end so why not wait until month 10 then submit then when you know the full 9 month repayment situation.
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By Tim Vane
27th Aug 2019 10:43

I would submit the accounts when the accounts are completed and signed off by the client, though I'd hesitate to call that a "strategy".

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RLI
By lionofludesch
27th Aug 2019 11:13

Are we talking about the accounts or the tax return ?

There was a debate on here last week about whether s455 charges should be in the accounts or not. The general consensus was no, if I remember correctly, though there were some dissenters. So there's nothing preventing you from submitting the accounts.

Alternatively, you can always shorten the accounting period.

Tax return's not an issue. You'll still have three months to submit the return after the nine months is up. The worst that can happen is a small interest charge.

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Replying to lionofludesch:
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By RaccW
27th Aug 2019 14:35

Thanks for the reply,

Is this the question you were referring to from last week?

https://www.accountingweb.co.uk/any-answers/loans-to-participators-tax-o...

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Replying to RaccW:
RLI
By lionofludesch
27th Aug 2019 15:36

Aye.

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Psycho
By Wilson Philips
27th Aug 2019 12:49

I would file the accounts, ignoring any potential s455 liability.

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