Director loan...help!

[northernladyuk]

Maybe pay the loan back and then withdraw it again but declare it as dividend immediately (even though you technically don't have reserves to support it) -to avoid bed&breakfast. Still illegal but more chance to get away with it.

However the new dividend would fall into the next financial tax year of the company and just make sure you build enough reserve to justify the dividend so that at the end of next financial year you are not overdrawn.

effectivelly you are declaring dividends now on money that will be earned in the future.

??? If the OP pays 22k back, then he has 22k for a dividend (unless it is required to pay CT, VAT or other obligations). Am I missing something (the original post is not entirely clear)?

[TheCyclingProgrammer]

What if the first loan is over 15k and the second loan under 15k? Just curious.

I believe the threshold applies to the original loan or possibly the outstanding balance at the company year end but I’m not certain.

[TheCyclingProgrammer]

Maybe pay the loan back and then withdraw it again but declare it as dividend immediately (even though you technically don't have reserves to support it) -to avoid bed&breakfast. Still illegal but more chance to get away with it.

However the new dividend would fall into the next financial tax year of the company and just make sure you build enough reserve to justify the dividend so that at the end of next financial year you are not overdrawn.

effectivelly you are declaring dividends now on money that will be earned in the future.

So: avoid caught by one tax avoidance rule by declaring an illegal dividend because you’re less likely to be caught...on what basis?

IMO HMRC would see this for what it is. With out a legally declared dividend I’d expect HRMC to still apply s455 on the basis that it is a continuation of the previous loan.

[northernladuk]

Maybe pay the loan back and then withdraw it again but declare it as dividend immediately (even though you technically don't have reserves to support it) -to avoid bed&breakfast. Still illegal but more chance to get away with it.

However the new dividend would fall into the next financial tax year of the company and just make sure you build enough reserve to justify the dividend so that at the end of next financial year you are not overdrawn.

effectivelly you are declaring dividends now on money that will be earned in the future.

Because we are all for advising which is the best illegal method to use

[michaelC]

The law is stupid to begin with, for taxing income and profits. i.e. Punish success and reward failure.

And then penalizing 32.5% for using your own money, amazing.

Anyhow i think best strategy is to repay loan now to avoid penalty. That would go into that financial year e.g 16/17.
Next day take that money out again as divs and that would belong to e.g. company financial year 17/18. Even though your reserves can't support the divs, that wouldn't be noticeable as long as the year end accounts of 17/18 are not overdrawn.

[TheCyclingProgrammer]

The law is stupid to begin with, for taxing income and profits. i.e. Punish success and reward failure.

So you don’t believe in paying tax?

And then penalizing 32.5% for using your own money, amazing.

It’s not your money. It’s the company’s money. Think about why the rule is there. It’s an anti avoidance charge to prevent people from taking an untaxed loan and never repaying it. The charge itself is temporary and will be repaid in the period after the loan is repaid.

[northernladuk]

Success is taking more out of the company you can pay back?

[northernladyuk]

The law is stupid to begin with,

I'm with you there.

[MrButton]

The law is stupid to begin with, for taxing income and profits. i.e. Punish success and reward failure.

And then penalizing 32.5% for using your own money, amazing.

Anyhow i think best strategy is to repay loan now to avoid penalty. That would go into that financial year e.g 16/17.
Next day take that money out again as divs and that would belong to e.g. company financial year 17/18. Even though your reserves can't support the divs, that wouldn't be noticeable as long as the year end accounts of 17/18 are not overdrawn.

Idiot

[SueEllen]

Idiot

Remember this is the professional part of the forums - choose your language more carefully.