Reporting period for DLA

Overdrawn DLA period

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Afternoon,

I'm preparing my client's company accounts which run 01/09/2014 - 31/08/2015 (due 31/05/2016) and rather than them pay the s455 tax charge on the overdrawn loan account I want to write it off, treat it as a benefit in kind and declare on their tax returns.  However, as their tax year runs differently to the financial year I am unsure which period I should report the DLA on.

Should I run the DLA from 01/09/2014 - 31/08/2015 and report to separate P11d WS4 for the cross over in tax year's?  Or, should I only be running it for 06/04/2015 - 05/04/2016? I have done the former but am now unsure so any guidance would be appreciated.

Replies (2)

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By Ford
25th May 2016 13:47

The company's accounts, the P11D benefit, and the tax consequences of writing off the loan are three separate issues.

1. The company's accounting records should include a contemporaneous chronological analysis of the movements on the loan account over the company's accounting period, the closing balance being shown on the balance sheet.

2. The P11D benefit for the beneficial loan should be calculated over each tax year to 5th April, if at any point the balance exceeds £10,000 then a P11D entry is required and Class 1A NIC may be payable by the company.

3. The write off happens at the time your write up the records, i.e. Not a date in the past. From the individuals perspective this is taxed as a distribution (i.e. Dividend), but from the company's perspective it is treated like a salary payment. However there is no CT deduction. Class 1 NIC is payable on the write off, both employers and employees, through the payroll.

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By JCresswellTax
25th May 2016 14:12

As Ford says, there are consequences to writing of the director's loan - a lot more than just a benefit in kind.

Are you aware of this? You don't mention it in your post.

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