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the £10k threshold of Director’s Loan Account

I hope someone with the knowledge can help me with a very stupid question.

Does the £10,000 threshold of Director’s Loan Account apply to each individual director, or collectively all of the directors in one company? In other words, can each director take a £10k loan from the company and repay it back before the company’s accounting year end?

Many thanks in advance 

Katie

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20th Oct 2018 10:34

I assume you're referring to the £10,000 threshold for a directors benefit in kind and not the charge on the company, for which there is no threshold but there are exemptions.

That being so, the company's accounting date is irrelevant. The threshold for the purpose of benefits in kind applies to each director for each tax year. Thus a director's loan can roll forward a loan from tax year to tax year without triggering a benefit in kind until the balance exceeds the threshold, and where it does a benefit in kind arises for that tax year.

Remember that for the purpose of the threshold all loans to the director (with some exceptions) must be aggregated.

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22nd Oct 2018 11:30

Thank you tonycourt.

Just to clarify, assume that the financial year for my company runs from 1 Jan to 31 Dec. I have two directors in my company, Director A and Director B.

On 3 January 2018, Director A took a loan of £9,000 and Director B took a loan of £8,000 from the company, totalling £17,000. On 20 December 2018, both Director A and Director B will pay back the full amount their loans to the company.

Now my questions are:

• As the total loan of £17,000 exceeds £10,000, does this trigger a benefit in kind event (e.g. these loans need to be declared on a P11D and the company will need to pay Class 1A National Insurance)?

• As the full amount of the loans has been paid back before the end of the financial year, will the company need to tell HRMC about the loans on the Corporation Tax return?

Many thanks in advance
Katie

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By Ruddles
to Katie2018
22nd Oct 2018 11:51

No

No

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