Wife - taking director's loan

[northernladuk]

This. For every person who manages to do well by cleverly playing round the rules, there's a dozen others who cock it up, forgetting to repay in time, or inadvertently breach some other threshold and end up getting in a mess.

Far too many people worry about the clever stuff when they should concentrate on the basics.

Nicely put and couldn't agree more. I do believe that the more people use these methods without understanding the basics of their company the higher it will start to climb on HMRC's radar. I doubt they will deal with it properly but the more it becomes evident to them people are using the loopholes without understanding the more interested they will become. Just my opinion of course.

[ASB]

That doesn't mean you cannot loan her money in another capacity. The devil is in the detail

And some of that detail MAY be in the articles of association. In any event there are different S455 implications.

[Martin at NixonWilliams]

Nicely put and couldn't agree more. I do believe that the more people use these methods without understanding the basics of their company the higher it will start to climb on HMRC's radar. I doubt they will deal with it properly but the more it becomes evident to them people are using the loopholes without understanding the more interested they will become. Just my opinion of course.

The most common problem this causes is when the company is to be wound up and the final CT bill cannot be paid. Although I haven't seen any evidence of HMRC noticing or questioning the cause of this being through the misappropriation of directors loans, it does seem that they will now object to the strike off of a company until the taxes are paid, whereas a few years ago a lot (some with vast sums owing) were slipping through the net far too easily.

[TheCyclingProgrammer]

No. Short and sweet but a director's loan requires being a director.

Except it's actually a participators loan and can be made to any shareholder subject to the normal rules. I've made use of my partners loan account before now to account for an accidental double payment of salary, although this was subsequently repaid.

Whether it's a good idea to make use of this facility or not, in addition to the directors loan account, is a different matter, as Martin pointed out. I certainly wouldn't consider it unless there was a documented and realistic repayment plan in place and the companies ability to pay its liabilities remained unaffected. Normal s455 and NI caveats apply too of course.

If you have significant retained profit in the company, probably not so risky (you can always declare a dividend to clear the loan).

[TheCyclingProgrammer]

And some of that detail MAY be in the articles of association. In any event there are different S455 implications.

What are the s455 implications in loaning to another participator or relative of, versus a director? (Genuine question, I thought s455 applied in either case)

[ASB]

What are the s455 implications in loaning to another participator or relative of, versus a director? (Genuine question, I thought s455 applied in either case)

If (which would be highly unlikely but not impossible) the director had no shareholding then it is different.

CTM61540 - Close companies: loans to participators: exclusion of certain loans

In practice I think it is highly unlikely any loans made by the average contractor company would be exempt from the S455 charge - especially with the recent tightening of the rules.

[TheCyclingProgrammer]

If (which would be highly unlikely but not impossible) the director had no shareholding then it is different.

CTM61540 - Close companies: loans to participators: exclusion of certain loans

In practice I think it is highly unlikely any loans made by the average contractor company would be exempt from the S455 charge - especially with the recent tightening of the rules.

Interesting, thanks for the link. Like you say though, it's unlikely to apply in most of our cases (or in OPs case either unless she has < 5% shareholding if I'm reading that link correctly).

I think OP needs to ask himself why they want to do what they propose. There are some genuine situations where a directors/shareholders loan up to a certain amount can be useful in some scenarios and as Martin already pointed out, the beneficial loan threshold goes up from £5k to £10k.

OP: you need to have a good think about why you want to do this (and why you can't just take the loan yourself) and make sure you've discussed it thoroughly with your accountant before proceeding because as others have warned, there isn't much room for error if you balls this up.

Personally, I do strongly believe (and my accountant has also advised this) that a genuine loan from your company should be backed up with a written commitment to repay it in a certain period with a proper repayment plan in place. It might not be necessary from a legal point of view but it shows due diligence and that you've seriously considered how they loan will be repaid.