S455 query

[TheMrs]

I took a director's loan for £5,000 last year which is due to be repaid by end May (i.e. within 9 months 1 day of year end of the period during which the loan was taken). It will be repaid with personal cash.

I also took a further £5,000 loan a few months ago, but during this current fiancial year which I will repay out of profit at year end.

My question is this - does the S455 corporation tax charge apply only to the year now due? So that as long as I repay the original £5,000 I won't be due any S455 despite having a further £5k still outstanding?

Logic says this is the only way it could work...?

With thanks

[Scruff]

NLUK standard reply, auto complete.

[northernladuk]

Surely you just treat each loan independently and apply the rule to each? Problem is if you keep taking them like this it could start to look like you are bed and breakfasting using one to roll the other over and carry it on. HMRC will try argue the loan is never being repaid and will try tax it as income.
Also i dont understand the bit about paying the company loan back with company profits? You mean declaring a dividend but not drawing it?

IMO take loan when you need it, pay it back and have done. Keep rolling them over time after time doesn't look good and although it might be genuine you may end up with HMRC on your back asking to explain which is something you don't want whatever the situation.

[northernladuk]

Also you are removing a useful tool to help you fix minor problemss at year end as you can't use the DL to roll something over the tax year so could end up paying more tax on something than you are saving with the loan.

[Andrew@Wisteria]

Correct s455 only applies to the amount due in the first year. Best to double check timings with your accountant to be certain.