OVERDRAWN DIRECTORS LOAN ACCOUNT!!

OVERDRAWN DIRECTORS LOAN ACCOUNT!!

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the company has lent the director 20 k and he will repay (no interest) over the next few years, i understand that this goes on the the CT600 and 25% ct is paid on the balance,  if when i do next years CT600 and they have repaid some of it how would i show this on the CT600, would they pay 25% on the new balance? or i am hoping that i just reclaim the 25% back on the repaid amount.

I hold my hands up this is the first time i have produced a ct600 with an overdrawn directors loan account.

thanks for all help

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Stepurhan
By stepurhan
31st Jul 2014 11:05

Not just s455

First the easy part. The first time the loan goes on a CT return, you pay s455 tax of 25%. Next year, you calculate the 25% on the loan outstanding, deduct any already paid and either pay or reclaim the difference. You don't pay s455 tax on the same loan twice.

However, at £20,000 with no interest, the director is receiving a benefit in kind as well. This will require a P11D and attract liabilities accordingly. The benefit liability will arise year on year as long as loan continues to be outstanding and no interest is paid.

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Euan's picture
By Euan MacLennan
31st Jul 2014 11:25

To expand ...

S.455 tax is only payable on loans advanced in the year, so in Year 1, you would need to complete the CT600A pages and pay the 25% tax on the balance not repaid within 9 months of the year-end.  If no further advances are made in Year 2(3, etc.), you don't have to complete the CT600A pages just because a loan is still outstanding.  If (part of) the loan is repaid in Year 2(3, etc.), you cannot claim the refund under s.458 on the CT600 return.  You have to write a letter to the CT district.

If the director pays less than the official rate of interest of 3.25% pa (from April 2014, 4% before that), he is receiving a taxable benefit-in-kind which is what needs to be reported on the form P11D.

 

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By mikhael
31st Jul 2014 12:33

document the loan

if you wish to avoid the benefit in kind issues by paying hmrc official rate you must document the loan agreement otherwise hmrc can ignore the interest you pay to your company  and also charge you the benefit in kind.. it must be a binding agreement to pay interest before hmrc will set it against the BIK amount

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