Director's Loan after Company year end

[maverick18]

Hi All,

This query is for a friend of mine.

His Company year end was March 2011. He has filed his accounts and the corporation tax liability was £6k, to be paid by Dec 2011.

Now, as on 31st March, the cash balance in the Company business account was £6.5k.

However, he withdrew £5.5k in July 2011. He has repaid back £3k to the Company and as of today Company cash balance is £4k. He intends to repay the remaining amount before Dec 2011 and pay the Corp tax on time.

Could anyone please tell me the tax implications of this transaction?

Is this a Director's Loan?

Does it have to be declared to HMRC?

Thanks!

[thunderlizard]

Yes, it is a director's loan. But since it's going to be paid back within the same accounting year in which it was taken out, I think it doesn't need to show on the accounts.
(& I don't see what the previous year's corporation tax bill has to do with this).

[eek]

(& I don't see what the previous year's corporation tax bill has to do with this).

Its irrelevant but if you don't know that fact, I can imagine why people would panic over it.

[Greg@CapitalCity]

Here are the implications;
(1) As the loan value exceeds £5,000, to avoid a benefit in kind charge, your friend needs to pay interest to his company based on the loan value. The current HMRC beneficial loan rate is 4%. This link here (HM Revenue & Customs: Loans - work out the value to use) will help you calculate the loan value to use.
(2) The loan also needs to be reported in the Corporation Tax return, within the supplement "CT600A loans to participators by close companies" - as the loan will be repaid within 9 months of the year end it was taken, there will be no tax effect here, but the transactions of taking the loan, and then repaying it still need to be reported.

This all happens in the annual accounts to year end Mar 2012 - no effect on the Mar 2011 accounts already filed. Hope that helps you.

[contractor55]

Sorry to jump in . Is a director loan per person? I have 4 x shareholders - of which one is a director and 1 x is the company sec- the other two shareholder do not hold any position. Can my company have four directors loan at £6k each ?

[JamJarST]

Sorry to jump in . Is a director loan per person? I have 4 x shareholders - of which one is a director and 1 x is the company sec- the other two shareholder do not hold any position. Can my company have four directors loan at £6k each ?

You have one director but are asking if you can give a loan to four directors. If you think about this for one minute the question should become obvious to you.

[contractor55]

I know but I thought the work Director may be extended to shareholder in some circumstances. Does a Company Sec. count as a director with re to Loans?

[JamJarST]

I know but I thought the work Director may be extended to shareholder in some circumstances. Does a Company Sec. count as a director with re to Loans?

No, a director is a director, and a company secretary is a company secretary. A director can be a company secretary, but being secretary does not make you a director.

[northernladuk]

I know but I thought the work Director may be extended to shareholder in some circumstances. Does a Company Sec. count as a director with re to Loans?

Jesus

[eek]

Jesus

I think you need to take a break from the business and accountancy forums for a few days. But I do wish people would apply common sense

A director's loan can only be given to or from a director (the clue is in the NAME).

Why are there still times when I wish we had the ability to set text to flash annoyingly.