Directors' Loan

[Dharmesh]

Not sure if I have posted in the correct category but hey hoe...When you receive a Directors' loan, is it due PAYE Tax? I understand the company pays CT on the amount loaned. Please could someone answer? Thanks!

[eek]

Not sure if I have posted in the correct category but hey hoe...When you receive a Directors' loan, is it due PAYE Tax? I understand the company pays CT on the amount loaned. Please could someone answer? Thanks!

It's definitely the wrong place (more general accounting rather than HMRC schema related).

But have you asked your accountant.... If you are asking and worried about things like this you really do need one...

[Kenny@MyAccountantFriend]

There is no PAYE tax on a directors loan when received.

However depending on when the loan is repaid the company could be liable for S455 taxes on the value of the loan.

This will only apply if the loan remains outstanding 9 months after the company year end in which the loan has been received.

[Martin at NixonWilliams]

Not sure if I have posted in the correct category but hey hoe...When you receive a Directors' loan, is it due PAYE Tax? I understand the company pays CT on the amount loaned. Please could someone answer? Thanks!

If the loan is no more than £10,000 it will be tax free.

If the loan exceeds £10,000 then a taxable benefit arises. The taxable benefit is calculated at 3.25% of the loan balance. The benefit value is taxable, but can be mitigated by paying the interest to the company instead.

The company only pays CT if the loan is not repaid within 9 months and 1 day after the accounting period end. The rate of tax paid in this event is 25%, however this tax can be reclaimed from HMRC once the loan is eventually repaid (it can only be reclaimed 9 months after the accounting period the repayment was made - so usually a very long wait!).

These are the basics but there may be more to consider depending on your circumstances.

I hope this helps.

Martin

[TheCyclingProgrammer]

The company only pays CT if the loan is not repaid within 9 months and 1 day after the accounting period end. The rate of tax paid in this event is 25%, however this tax can be reclaimed from HMRC once the loan is eventually repaid (it can only be reclaimed 9 months after the accounting period the repayment was made - so usually a very long wait!).

Out of curiosity, if you are due a repayment of s455 tax, do HMRC actually re-pay it or do they credit it to your CT account?

[Martin at NixonWilliams]

Out of curiosity, if you are due a repayment of s455 tax, do HMRC actually re-pay it or do they credit it to your CT account?

I've seen it both ways, but it used to be easy enough to have the payment made direct if you requested that to happen. A lot of CT related issues used to be down to the tax office in question and their discretion, however (dare I say) HMRC's processes seem to be more consistent these days..

[Fandango]

If the loan exceeds £10,000 then a taxable benefit arises. The taxable benefit is calculated at 3.25% of the loan balance. The benefit value is taxable, but can be mitigated by paying the interest to the company instead.

Out of interest if the DLA was >£10k at what point does the 3.25% interest become applicable? at the point it went over £10k or from the end of the financial year?

[Martin at NixonWilliams]

Out of interest if the DLA was >£10k at what point does the 3.25% interest become applicable? at the point it went over £10k or from the end of the financial year?

Interest applies from the point the £10k is exceeded.

[Fandango]

thanks Martin