Outstanding Director's Loan - a no-no at year end?

[ruth11]

This tax year I have paid myself £4000 over the higher rate tax threshold in Divis. I was going to just pay the tax on it, but then I remembered about Director's Loans. I have asked my accountant if I can re-classify this Divi as a Director's Loan that I will pay back in April, in the new tax year.
I realise I'm doing this to eliminate my need to pay Tax, but I figure if the facility is there, I should be able to use it.
However, my accountant sent me a fact sheet to read before they re-classify it and in big bold letters it says that they don't advise having any outstanding Director's Loan at the end of a financial year.

I have asked for clarification as to why, because doing this will save me £1000, but I wondered if you good people know whilst I wait for explanation? If it's going to raise a big red flag on me, then I guess I'll just suck in up and pay the tax, but if it's a legitimate way to work, then that's what I want to do...

Ta

[Clare@InTouch]

If a directors' loan is outstanding at the year end you will be charged extra CT equivalent to 25% of the balance.

However, this extra CT would not be due if the loan was repaid within 9 months of that year end. It might simply mean you have to delay filing your accounts until you've repaid the loan.

[Vallah]

There always used to be a de minimis limit of about £5k as well, that meant if the outstanding amount was below this level, then they didn't bother with the tax. Not sure if this is still the case.

[ruth11]

I will definitely be paying it back next month...

[Clare@InTouch]

There always used to be a de minimis limit of about £5k as well, that meant if the outstanding amount was below this level, then they didn't bother with the tax. Not sure if this is still the case.

That relates to benefit in kind - if a loan is under £5,000 for the whole year then there's no beneficial loan interest.

[Vallah]

That relates to benefit in kind - if a loan is under £5,000 for the whole year then there's no beneficial loan interest.

I know, and this applies to directors' loans as well.

[ruth11]

As I've agreed to not "borrow" any more and pay it back next month, accountant is happy to let me do this now.
Saves me a grand

[gingerjedi]

I paid back my outstanding loan of £1900 by the December deadline and borrowed £1800 back again in January, I'm not sure if there will be any fallout from doing this?

[Clare@InTouch]

I paid back my outstanding loan of £1900 by the December deadline and borrowed £1800 back again in January, I'm not sure if there will be any fallout from doing this?

Potentially - if HMRC look through the transaction and see it as "bed & breakfast" loan (if they ever looked at it of course). Just make sure you can justify it as two completely seperate loans, rather than the second one purely being a way to avoid the tax implications of having the first one.

[gingerjedi]

Potentially - if HMRC look through the transaction and see it as "bed & breakfast" loan (if they ever looked at it of course). Just make sure you can justify it as two completely seperate loans, rather than the second one purely being a way to avoid the tax implications of having the first one.

It was a "bed & breakfast" loan, I simply didn't have enough money to pay it off so I borrowed some cash from my family for a short period.

Am I right in thinking you can claim back any tax paid on a directors loan once it is repaid?