Directors Loans

[the average man]

what are they and how do they work

[the average man]

Also are there any implications for me if I transfer my unpaid taxes into a high interest earning account? Sounds like a few people do that. Does that account have to be in the Ltd. co's name or can it be my own personal savings account? If it is a personal account will the taxman want to see statements for it?

I suppose what I'm getting at is whether I can dip into it but top it back up and certainly pay any tax due...?

[Lewis]

You can borrow interest free up to £5K without any benefit in kind. Just write yourself a cheque. But you should pay it back before the year end plus a word of warning my accounts recommend you don't take ever take directors loan. Can't remember the exact reasons behind this.

[DaveB]

Also are there any implications for me if I transfer my unpaid taxes into a high interest earning account? Sounds like a few people do that. Does that account have to be in the Ltd. co's name or can it be my own personal savings account? If it is a personal account will the taxman want to see statements for it?

I suppose what I'm getting at is whether I can dip into it but top it back up and certainly pay any tax due...?

Directors Loan accounts first.

You can take a directors loan of up to £5000 pa from the company, interest free. However it has to be paid back in full within 9 months of the Co. year end or it will be subject to tax as a BIK and HMRC may decide it is actually a disguised salary payment and tax it as that as well.


Savings accounts.

The companys' money should never, ever, end up in your personal account(s) unless it was extracted from the co. legitimately as salary, expenses, dividends or a directors loan. Anything else gets you into all sorts of trouble with HMRC. Once it is out of the co. you cannot just put it back ( unless it was a loan but frankly it's not worth the hassle ).

What you can do is open a high interest account in the Co.s' name and put the money in there. If you do do this, remember to account for the interest earned as it becomes part of the Co. profits and subject to corporation tax.

[NotAllThere]

AIUI it is technically illegal to use the directors loan account to receive loans from the company. It exists for directors to make loans TO the company.

But this is not enforced.

[r0bly0ns]

AIUI it is technically illegal to use the directors loan account to receive loans from the company. It exists for directors to make loans TO the company.

But this is not enforced.

No mention in it being illegal in the HMRC definition of a directors loan......

http://www.hmrc.gov.uk/manuals/nimmanual/nim12016.htm

A director’s loan, or current account, with his or her company represents from the company’s viewpoint transactions between the company and the director. It is like a bank account in that it can be in credit (‘cr’ or what the company owes to the director) or in debit (‘dr’ or what the director owes to the company). Similarly there might be an agreement to pay interest, in either direction, depending on whether the account is in credit or overdrawn. Unlike a bank account however, the value of items other than cash can be debited or credited.

[the average man]

woops! I just transferred some money into my current account

I've transferred it back into my business account so hopefully shouldn't have been out of the account for longer than 24 hours.

does my accountant have to send my bank statements to the taxman???

[NotAllThere]

No mention in it being illegal in the HMRC definition of a directors loan......

http://www.hmrc.gov.uk/manuals/nimmanual/nim12016.htm

Perhaps that's because it isn't a tax law?

[NotAllThere]

woops! I just transferred some money into my current account

I've transferred it back into my business account so hopefully shouldn't have been out of the account for longer than 24 hours.

does my accountant have to send my bank statements to the taxman???

No.

And if you were investigated and they checked your bank statements, they'd query it, you'd give your answer, and they'd move on.

So, why did you transfer the money, and why do you think you were wrong to do so? You could convert it to a salary payment or a dividend.

[r0bly0ns]

No mention in it being illegal in the HMRC definition of a directors loan......

http://www.hmrc.gov.uk/manuals/nimmanual/nim12016.htm

Perhaps that's because it isn't a tax law?

Still can't see the HMRC telling you its OK if it's illegal.....

I have done it myself before, under the advice of my accountant.