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P11D Interest on DLA

P11D Interest on DLA

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Can someone clarify the following for me please:

1. If a director takes a loan of £15k on 01.06.14 and following a dividend voted on 05.04.15 their DLA is now in credit, based on the normal average method, the beneficial loan interest is worked out as follows:

£15,000 + £0 / 2 = £7,500 x 10/12 = £6,250 x 3.50% = £218.75

2. If you were using the alternative method and the loan was overdrawn prior to 01.06.14 al be it less than £10k do you work out the interest from 06.04.14 or from when the loan was over £10k.

3. Is the daily interest calculated on the whole loan, and not just the amount over £10k?

Many Thanks

Replies (6)

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By BKD
01st Jun 2015 16:46

Answers

1. You may be wrong (see 2 below)

2. If the loan exceeded £10k at any time in the tax year then you calculate interest for any time that the loan existed. That applies also to the average method. But it gets complicated if there are times in between when the loan is in credit (because you treat each overdrawn period as a separate loan).

3. On the whole amount.

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By craig__2k4
01st Jun 2015 16:55

Official rate of interest

is 3.25% FYI.

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By Jigs
01st Jun 2015 17:04

Thanks for your quick replies!

Re; point 2, I am a bit confused if the loan was £7k prior to 01.06.14 do you not take this into account at all when calculating the interest?

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By Steve Kesby
01st Jun 2015 17:07

In 1...

... the £0 should actually be the amount of the loan immediately prior to repayment. Otherwise, by the same logic that you have applied (assuming that the whole amount was advanced on 01.06.2014) you might have come up with (£0 + £0)/2 = £0 x 10/12 = £0 x 3.25% = £0.

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By Steve Kesby
01st Jun 2015 17:19

So are you saying that...

... the balance was £7K at 6/4/14 (or when the loan first arose if later) and was £22K immediately before repayment on 5/4/15 (with £15K having been drawn on 1/6/14).

If that is the case, then (subject to the number of complete tax months, from when the £7K arose), I'd say the benefit by the averaging method was:

(£7K + £22K)/2 = £14.5K x 3.25% = £471.25.

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By BKD
01st Jun 2015 18:44

Steve is right (as usual) - re the opening and closing amounts

The 'solution' is to repay all but £1, then repay that £1 the following day. Average then becomes (x+1)/2.

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