Dividends/directors loan and year end?

[stek]

Dividends/directors loan and year end?

I could be wrong but....

You need to declare a dividend retrospectively and have held a minuted board meeting to approve the voucher. I suspect u can fudge this and get away with it, not my cup of tea but the only way I think.

No money will physically move so long is there's enough to clear the loan and leave enough for CT but if you don't do it today (I reckon your year end is 3rd April 2013 ie today) otherwise you may well be liable for the 25% charge on an overdrawn directors loan account.

Wait for the bean counters to come along or NLUK to scare you more....

[stek]

Dividends/directors loan and year end?

I could be wrong but....

You need to declare a dividend retrospectively and have held a minuted board meeting to approve the voucher. I suspect u can fudge this and get away with it, not my cup of tea but the only way I think.

No money will physically move so long is there's enough to clear the loan and leave enough for CT but if you don't do it today (I reckon your year end is 3rd April 2013 ie today) otherwise you may well be liable for the 25% charge on an overdrawn directors loan account.

Wait for the bean counters to come along or NLUK to scare you more....

Looks like I am wrong...!

[northernladuk]

2) You can pay yourself a dividend on any day you like, providing you have the reserves available. You should consider the date of the dividend for tax purposes of course, though 31st March & 5th April would fall in the same tax year.

Not to labour a point but these resources are PROFIT not any money that happens to be sitting in your account. I don't see any mention of £16k vat at around £18k CT in any of these conversations let alone warchest. Looking at the blase way you are running your finances I strongly suspect something is wrong that you haven't mentioned or know about yet. The OP's post kinda confirms what I am thinking though...

Well I was planning on clearing the loan using a dividend (no money has to move, it just clears the account).

If for example:

I had a loan of £10,000
my current balance in the account was: 2,000

To declare a dividend of £10,000 I would need 20% set aside for CT so I would need £2000 to remain in the account

So a dividend payment of £10,000 to clean the loan off to 0
Leaving £2,000 in the account for CT. Or would I need £12,000 in there to consider a dividend, but no money actually moves.

You don't have a loan of 10k, you have one of 30k. Makes a big difference. I don't see any VAT money included here. I would take a guess using your sums above it will take 4+ months to pay off the loan which means you haven't got any money to divi out to yourself so have no income for that period? Also to give yourself a 30k income for that year you will have divid yourself £60k in total so will have a nice tax bill on top of all that. The numbers just don't add up.

I hope you have a rock solid contract and can get them end to end as well.......

[northernladuk]

Can you take a picture of your accountants face when you land this on his/her desk please.

[Bunk]

I will take a look and possibly look at getting an accountant!!

No possibly about it, it sounds like you desperately need one. Get one as soon as possible and tell them everything, it's your best chance of getting out of this without doing too much damage.

[Wanderer]

2) Can I pay myself a dividend on 5th April 2013 or did it have to happen on the 31st March? In which case does this affect any interest/NIC/tax on the directors loan?

If you already have the cash then you could write up the paperwork to declare a dividend on the 5th April to clear the director's loan and this can be done some time after 5th April. You need to discuss this with the accountant.

Slightly confused! I've been off for a couple of weeks due to an operation, hoped to get this sorted.. My fault for leaving it so late!!

Don't panic, it will be OK but you need to get an accountant to sort it out. DON'T call it a director's loan, tell your accountant they were dividends and you want them to write up the paperwork for you. Have them write up the meeting minutes and dividend vouchers to account for your drawings to account for them as dividends (NOT director's loans).

If you borrowed money from the company when there are insufficient funds to take a dividend then this will have to be accounted for as a director's loan. Be careful to avoid the 25% s455 charge on the loan by clearing it before 9 months after the company year end. You should also understand "bed and breakfasting" of director's loans and why HMRC don't allow it. You are going have to pay 4% interest on the director's loan or it be taxed as a BIK. I suggest you opt to pay the company interest because this becomes company profit and is paid back to you minus Corporation Tax so the net cost of the loan to you is probably only about 1%.