Short-term Directors Loan

Is there a need to pay p11, personal tax, NI or company tax on a short term directors loan?

Didn't find your answer?

 This seems a simple question but its really hard to get a straight answer.

Ltd company with 275k retained profit - company year ends 31st January

The Managing Director wishes to take 165k Directors loan on the 6th April 2023, to be repaid in full, along with the HMRC interest, which has been calculated on a monthly basis, on 5th October 2023 (ie a 6 month loan).

As far as I can see, there is No BIK, no requirement to pay National Insurance, no implications for the Directors personal tax, and no company tax to pay.  The only burden is to ensure it is reported in the Company Accounts

Is this correct?

cheers

Replies (11)

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By Wanderer
25th Jan 2023 00:57

bwxen2 wrote:

 This seems a simple question but its really hard to get a straight answer.

What does your accountant say?
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By jpcentral
25th Jan 2023 08:45

Quote from the HMRC website:

"If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must:

treat the loan as a ‘benefit in kind’
deduct Class 1 National Insurance
You must report the loan on a personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest."

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Replying to jpcentral:
By Ruddles
25th Jan 2023 08:50

A prime example of why taxpayers should never pay attention to anything they read on GOV.UK

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By Duggimon
25th Jan 2023 09:09

Does the managing director own any shares?

edit: I don't think that's really relevant in this situation, but it is relevant to all the rules you've been looking at and you didn't mention it in your question so I thought I'd ask.

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Replying to Duggimon:
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By bwxen2
25th Jan 2023 10:39

Yes..100%

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By meadowsaw227
25th Jan 2023 11:22

I would want to see a legally drawn up contract and a personal guarantee in place before I would even consider it ! .

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Replying to meadowsaw227:
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By bwxen2
25th Jan 2023 13:42

Thanks yes that is intended!!

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By SteveHa
25th Jan 2023 12:04

ITEPA 2003, S176 and S180 is your friend (or enemy).

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Replying to SteveHa:
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By bwxen2
25th Jan 2023 13:47

Thankyou yes...seems its all about the interest. The taxable cash benefit of the loan is the difference between the HMRC interest rate and what is actually paid. This meets my understanding that IF this loan is paid off, with interest, before 9 months and 1 day and within the company year, then there is no BIK for personal reasons, and no CT.

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Replying to bwxen2:
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By Wanderer
25th Jan 2023 13:56

A little knowledge is a dangerous thing. You are conflating some aspects.

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Replying to Wanderer:
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By bwxen2
25th Jan 2023 14:29

Thankyou...so still no easy answers!!

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