Reply to: Unaware of Directors loan

[Jessica@WhiteFieldTax]

There is a good reason for that......

Bog off

[Waldorf]

There is no need to run everything through a director's loan account. In fact, I think it is a terrible idea.

Pay your salary separately and base it on your payslip.
Pay your dividend(s) separately and prepare your divi minute/voucher.
Pay your expenses separately based on your expense claim.
If you want to take a loan, take that separately.

Taking 'drawings' and putting them to your loan to then 'sort it out' at month/year end is just asking for trouble IMO.

Agreed but let’s be honest not all contractors are financially savvy and many just take money from the bank with no paper trail, so processing it all through a director’s loan account is often the easiest way.

[northernladuk]

Agree. 10, 15, maybe 20, years ago, it was the norm, but life’s now moved on. (Christ, I sound old)

There is a good reason for that......

[Jessica@WhiteFieldTax]

Beat me to it. I was just about to post the same. Why use a DLA when you don’t have to. IME, it just causes extra work, and gives HMRC something to delve into should you ever be investigated.

Agree. 10, 15, maybe 20, years ago, it was the norm, but life’s now moved on. (Christ, I sound old)

[Alan @ BroomeAffinity]

Unaware of Directors loan

There is no need to run everything through a director's loan account. In fact, I think it is a terrible idea.

Pay your salary separately and base it on your payslip.
Pay your dividend(s) separately and prepare your divi minute/voucher.
Pay your expenses separately based on your expense claim.
If you want to take a loan, take that separately.

Taking 'drawings' and putting them to your loan to then 'sort it out' at month/year end is just asking for trouble IMO.

Beat me to it. I was just about to post the same. Why use a DLA when you don’t have to. IME, it just causes extra work, and gives HMRC something to delve into should you ever be investigated.

[MrButton]

FTFY

It didn't need fixing.

My accountant is a FA accountant.

[northernladuk]

No.

But let me ask a FA accountant.

FTFY

[MrButton]

You know what assume does....

No.

But let me ask my accountant.

[northernladuk]

At intouch everything seems to go through the directors loan (dividends/salary/expenses etc) but you get a monthly summary when you close your month of accounts and as long as you pay everything as listed then it’s always £0. Seems a nice way to do it.

I assume FreeAgent does something similar.

You know what assume does....

[craigy1874]

There is no need to run everything through a director's loan account. In fact, I think it is a terrible idea.

Pay your salary separately and base it on your payslip.
Pay your dividend(s) separately and prepare your divi minute/voucher.
Pay your expenses separately based on your expense claim.
If you want to take a loan, take that separately.

Taking 'drawings' and putting them to your loan to then 'sort it out' at month/year end is just asking for trouble IMO.

[MrButton]

At intouch everything seems to go through the directors loan (dividends/salary/expenses etc) but you get a monthly summary when you close your month of accounts and as long as you pay everything as listed then it’s always £0. Seems a nice way to do it.

I assume FreeAgent does something similar.

[radish2008]

Yes, SJD. Much experience with them?

I found myself with a directors loan at SJD - never actually got to the bottom of it - settled it after a few years and paid a bit of interest. I'd get rid of SJD if I were you - this is likely to be the start of more troubles. Plus their online system is tulip I've heard - switch to Free Agent - I can recommend Darren.

[Darren at Fox-Bartfield]

Directors Loan

Bit concerning that the accountant hasn't picked this up or mentioned an overdrawn directors loan account at the year end, let alone through the year itself. Highlights one of the benefits of a realtime system such as Freeagent.

[MrButton]

Unaware of Directors loan

I haven’t. But there are plenty of threads on here with customers who say the service is declining. I also have a couple of close friends who have been with then and left due to poor service and mistakes.

Best to see what they say first.

[equinox]

Sounds fine with regard to 24 month rule. I guess only your accountant can really answer then. Is it SJD?

Yes, SJD. Much experience with them?