Hello, my friend it was good to meet up with you yesterday and again have my brains tested by you. Because you are a client it gives me great pleasure to sift through the tax legislation with you.
The old S419 TA 1988is now extinguished and is replaced by the employment income manual that is ‘eim manual’ and then it is knowing to where to find the information in the manual like trying to find a place in a book.
Dividends /directors loansare tax neutral to you because you have not taken out from the company the full amount of salary/dividends up to 43,875. If you had then you would be paying the higher rate of dividends at 32.50% less 10% imputed tax making an additional 22.50 % tax to pay to HMRC. Please note that taking money from a limited company bank account in credit has imputed into it a 10% tax credit and since this is the rate of tax on dividends then there is no further tax to pay for you.
If loans of more than 5000 are taken from the company then tax at 25% must be paid to HMRC and then repaid by HMRC in tranches as the loan is repaid to the company. To be honest 3% in excess of 5,000 is fair as you cannot get more than this from a building society.
Please also remember than dividends/loans are not tax deductible for corporation tax and so there is an inherent 21% charge to corporation tax which is not the same for tax deductible salaries in the accounts of limited companies and so I leave this with you.