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Overdrawn Directors Loan Account Example

Overdrawn Directors Loan Account Example

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Hello,

Further to my recent question (thanks for all the replies) I thought it was useful to provide the following example. 

I'm still struggling with this so any help with the following example would be much appreciated. I looking for any amount of the Sept 19 dividend that can be allocated to the 31/03/19 year end balance.

31/03/2019 B/fwd (25,179.73)
Apr-19 Various payments (3,885.05) (29,064.78)
Apr-19 Net Pay 1,757.86 (27,306.92)
May-19 Various payments (7,716.93) (35,023.85)
May-19 Net Pay 1,757.86 (33,265.99)
Jun-19 Various payments (1,470.00) (34,735.99)
Jun-19 Net Pay 1,757.86 (32,978.13)
Jul-19 Various payments (7,600.00) (40,578.13)
Jul-19 Net Pay 1,757.86 (38,820.27)
Aug-19 Various payments (3,450.00) (42,270.27)
Aug-19 Net Pay 1,757.86 (40,512.41)
Sep-19 Various payments (7,000.00) (47,512.41)
Sep-19 Net Pay 1,757.86 (45,754.55)
Sep-19 Dividends 35,000.00 (10,754.55)
Oct-19 Various payments (8,409.00) (19,163.55)
Oct-19 Net Pay 1,739.06 (17,424.49)
Nov-19 Various payments (7,450.00) (24,874.49)
Nov-19 Net Pay 1,739.06 (23,135.43)

Bed and breakfasting - my understanding is that, when a loan in excess of £10k is repaid by the director, no further loan over this amount can be withdrawn within 30 days. This does not appear to have happened in this case.

Where a loan of over £15k has been made to a director of the company, and before any repayment is made there is an intention to take a future loan of more than £5,000 which is not matched to another repayment, then the bed and breakfast rules apply. It looks like this would apply here and the total further loans after 31/03/19 exceed the balance at 31/03/19 so there would be no repayment to match to the 31/03/19 balance reducing the s455 charge - correct?

Replies (8)

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By CWservices6064
18th Dec 2019 17:22

In answer to my own question I don't think that the 30 day rule or the arrangements rules apply to the dividend or net payroll credited to the DLA as they are taxable credits giving rise to a valid repayment claim under CTA 2010, s458.

They can be 'matched' to the balance at 31/03/19 and so the DLA is treated as repaid in full within 9 months.

...............thanks to whitevanman.

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By SXGuy
18th Dec 2019 18:10

Correct. If paye has been credited to the dla then this has been treated as a repayment.

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Replying to SXGuy:
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By whitevanman
18th Dec 2019 20:04

I do not think that is exactly it. It is where the credit to DLA gives rise to the tax. So, for example, the dividend is taxed when paid. If it were to be paid in cash and that cash re-introduced (daft, I know) it would not fall within the exceptions. However, if the dividend is credited to the DLA, that is when it is paid and that is what gives rise to the tax liability. Same sort of thing with a bonus or salary which is taxable when paid.

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Replying to whitevanman:
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By SXGuy
19th Dec 2019 07:04

.

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Replying to whitevanman:
Psycho
By Wilson Philips
19th Dec 2019 09:29

There is a school of thought that HMRC's analysis of section 464C(6) is wrong - although why one would want to challenge it, I don't know. That school of thought runs something like this:

An interim dividend is taxable when it is paid. So, the credit of an interim dividend to the DLA is payment, which then gives rise to the income tax charge. All fine.

A final dividend, though, is a different beast. It is taxable when declared, so there is an argument (I'm not saying that I agree with it) that the credit to the DLA does not itself give rise to the tax charge.

The same applies (so they say) to salary/bonus payments. Particularly for directors, the time of payment for tax purposes may be earlier than the time of credit to DLA, in which case again there is an argument that the credit to the DLA does not itself give rise to the tax charge.

But HMRC's guidance says what it says and I for one would not be challenging it.

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Replying to Wilson Philips:
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By whitevanman
19th Dec 2019 09:44

Agreed.

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By Arcadia
21st Dec 2019 14:49

There is n0 such thing as a final dividend.

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Replying to Arcadia:
Psycho
By Wilson Philips
21st Dec 2019 15:53

I think you have some reading to do.

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