Confused over timeline for repaying Director's Loan

[Bellona]

Hi,
Got myself confused and accountant is away so thought i'd check my sanity here
My accounting year for this year is 1 Feb 2015 to 31 Jan 2016
I took a 4K Dir Loan on 10 Feb 2015
I'm calculating I need to repay by 1 Oct 2016 (9 months and one day from end of accounting year).
Or is it by Oct this year (2015) ?
Also, if I pay it back within the time limit there is no interest to pay ?
Ta in advance !

[Louisa@InTouch]

You have two things to consider with director loans.

1 - Benefit in Kind

Any loan over £10,000 will be a benefit in kind, and you’ll pay tax on the deemed value of any interest you’ve saved by not going to a bank.

Keep in mind this is the total value of money you owe the company, so if you take a loan of £10,000 and then overpay your wages by £2 then the loan is £10,002 and becomes taxable. There is no benefit in kind if you pay interest to the company at 3%.

2 - s455 Charge

Any loans outstanding at the balance sheet date (company yearend) have to be disclosed in the accounts and on the company tax return.

If they are not repaid within 9 months of the year end then the company will pay extra Corporation Tax of 25% of the loan value. This extra 25% is repaid to the company by HMRC when you repay the loan to the company. You should avoid repaying a loan and then taking it out again soon after as it’s an obvious avoidance tactic HMRC call bed & breakfasting. They will see through it and tax it as if it had never been repaid. If loans are outstanding this will also delay us filing the accounts until they are either paid, or you agree the extra tax charge.

With your company year end of 31 Jan 2016, you will need to have repaid your loan by 1 Nov 2016.

[northernladuk]

You are correct about the 9 months after company year so end of Oct 2016. Oct 15 is within the current year so it's not that.

Limit for a Directors Loan is now 10k by the way.

[Bellona]

You have two things to consider with director loans.

1 - Benefit in Kind

Any loan over £10,000 will be a benefit in kind, and you’ll pay tax on the deemed value of any interest you’ve saved by not going to a bank.


With your company year end of 31 Jan 2016, you will need to have repaid your loan by 1 Nov 2016.

Thanks Louisa - the Div was 4K, there is no BIK issue

[Bellona]

You are correct about the 9 months after company year so end of Oct 2016. Oct 15 is within the current year so it's not that.

Limit for a Directors Loan is now 10k by the way.

Thanks

[ChimpMaster]

You are correct about the 9 months after company year so end of Oct 2016. Oct 15 is within the current year so it's not that.

Limit for a Directors Loan is now 10k by the way.

Just to clarify, this statement is true if you want to avoid BIK and paying any interest on the loan. You can take larger loans so long as the appropriate steps are taken, such as board meeting/notes and interest paid at (currently) 3%.

[ceebeepps]

Thanks Louisa - the Div was 4K, there is no BIK issue

have you take a loan or a dividend then?

[northernladuk]

have you take a loan or a dividend then?

Good spot. Pedantic but worth pointing out.

[JB3000]

Hi,
Got myself confused and accountant is away so thought i'd check my sanity here
My accounting year for this year is 1 Feb 2015 to 31 Jan 2016
I took a 4K Dir Loan on 10 Feb 2015
I'm calculating I need to repay by 1 Oct 2016 (9 months and one day from end of accounting year).
Or is it by Oct this year (2015) ?
Also, if I pay it back within the time limit there is no interest to pay ?
Ta in advance !

I think it would need to be repaid by 31/10/2016, i.e. 9 months after the year end

This is also the deadline to file your accounts with companies house to not lose £150 on a fine- so two very good reasons to pay on or before 31/10/2016

[ASB]

Thanks Louisa - the Div was 4K, there is no BIK issue

I assume you mean loan and it is just a typo ?

You can of course repay the loan by declaring a dividend and posting to the current account rather than paying it out. The same timescales would apply in this eventuality.