Director loan and new dividend tax

[PurpleGorilla]

How about this senario;

FY year end take a dividend to drain account right down to next to nothing.

Then immediately make a director loan to the business to fill the account.

Then repay the loan once the new FY gets going.

This would help empty your account without leaving you dry and maximise things before the new rules come in.

[DaveB]

How about this senario;

FY year end take a dividend to drain account right down to next to nothing.

Then immediately make a director loan to the business to fill the account.

Then repay the loan once the new FY gets going.

This would help empty your account without leaving you dry and maximise things before the new rules come in.

Assuming you leave enough in the company to settle it's liabilities so you dont decalre an illegal divi.

Depends if you were already in the 40% bracket or not. If you wern't then you end up paying 25% on anything over that this year, as opposed to 7% on it next year (after the 5k allowance) if you stay below the threshold.

If you are already over the limit then you need to work out if you would be better off paying 32.5% on a smaller amount next year or 25% on a larger amount this year. Assuming your dividends would have been roughly the same as previous years.

[jamesbrown]

Just suppose, theoretically, YourCo has a £50K corporation tax payment due in April next year. You are a responsible director and have had the £50K set aside in an account earning some paltry level of interest.

Is there anything to prevent you doing the following?

1. Pay a dividend of £50K at the end of March.
2. Loan the money back to YourCo to pay the tax.
3. Next year, take dividends and salary up to £43K, and anything you want to take above that is loan repayment (up to £50K).

Does that work, or would it be considered an illegal dividend if it put the company into a negative balance situation? Presumably, the negative balance would be resolved by the end of the company's year.

You also need to bear in mind that, depending on the dividend taken in 2016/17, the real difference in the tax position may be very small indeed (versus 2015/16) once the grossing procedure is removed, even if the scope for paying no tax up to the higher rate limit is eliminated next year. Calculations here:

Dividend Tax rules change 2016

[northernladuk]

Go for it.