Reply to: Director loan...help!

[WordIsBond]

The tax discussion presumably belongs in General.

OP never came back to give details, makes it pretty hard to help him out.

[MB2]

An interesting viewpoint. Are you saying that if you cost the government more you should pay more tax or less than someone who costs the government less? Because that sounds very much like "tax those with the lowest incomes more than the higher ones", which generally leads to a huge increase in the national debt.

It would also mean children, the sick, the unemployed and old people paying tax which is likely to prove problematic too.

[TonyF]

I believe in paying your fair share in tax. Your fair share should not be based on how much you earned within a specified calendar year. It should be based on how much you cost to the government.

An interesting viewpoint. Are you saying that if you cost the government more you should pay more tax or less than someone who costs the government less? Because that sounds very much like "tax those with the lowest incomes more than the higher ones", which generally leads to a huge increase in the national debt.

[michaelC]

So you don’t believe in paying tax?

I believe in paying your fair share in tax. Your fair share should not be based on how much you earned within a specified calendar year. It should be based on how much you cost to the government.
Income and profit do not even represent one's true wealth hence the concept of income tax is incorrect twice.

It’s not your money. It’s the company’s money. Think about why the rule is there. It’s an anti avoidance charge to prevent people from taking an untaxed loan and never repaying it. The charge itself is temporary and will be repaid in the period after the loan is repaid.

Its not my money, but its also not the government's money. They should not care how much someone earned or has in his/his company's bank account, its none of their business.

[northernladuk]

Remember this is the professional part of the forums - choose your language more carefully.

Seemed fair enough to me.

[northernladyuk]

Remember this is the professional part of the forums - choose your language more carefully.

Admin has tagged this thread.

[MrButton]

Remember this is the professional part of the forums - choose your language more carefully.

Much apologies.

[SueEllen]

Idiot

Remember this is the professional part of the forums - choose your language more carefully.

[MrButton]

The law is stupid to begin with, for taxing income and profits. i.e. Punish success and reward failure.

And then penalizing 32.5% for using your own money, amazing.

Anyhow i think best strategy is to repay loan now to avoid penalty. That would go into that financial year e.g 16/17.
Next day take that money out again as divs and that would belong to e.g. company financial year 17/18. Even though your reserves can't support the divs, that wouldn't be noticeable as long as the year end accounts of 17/18 are not overdrawn.

Idiot

[northernladyuk]

The law is stupid to begin with,

I'm with you there.

[northernladuk]

Success is taking more out of the company you can pay back?

[TheCyclingProgrammer]

The law is stupid to begin with, for taxing income and profits. i.e. Punish success and reward failure.

So you don’t believe in paying tax?

And then penalizing 32.5% for using your own money, amazing.

It’s not your money. It’s the company’s money. Think about why the rule is there. It’s an anti avoidance charge to prevent people from taking an untaxed loan and never repaying it. The charge itself is temporary and will be repaid in the period after the loan is repaid.

[michaelC]

The law is stupid to begin with, for taxing income and profits. i.e. Punish success and reward failure.

And then penalizing 32.5% for using your own money, amazing.

Anyhow i think best strategy is to repay loan now to avoid penalty. That would go into that financial year e.g 16/17.
Next day take that money out again as divs and that would belong to e.g. company financial year 17/18. Even though your reserves can't support the divs, that wouldn't be noticeable as long as the year end accounts of 17/18 are not overdrawn.

[northernladuk]

Maybe pay the loan back and then withdraw it again but declare it as dividend immediately (even though you technically don't have reserves to support it) -to avoid bed&breakfast. Still illegal but more chance to get away with it.

However the new dividend would fall into the next financial tax year of the company and just make sure you build enough reserve to justify the dividend so that at the end of next financial year you are not overdrawn.

effectivelly you are declaring dividends now on money that will be earned in the future.

Because we are all for advising which is the best illegal method to use

[TheCyclingProgrammer]

Maybe pay the loan back and then withdraw it again but declare it as dividend immediately (even though you technically don't have reserves to support it) -to avoid bed&breakfast. Still illegal but more chance to get away with it.

However the new dividend would fall into the next financial tax year of the company and just make sure you build enough reserve to justify the dividend so that at the end of next financial year you are not overdrawn.

effectivelly you are declaring dividends now on money that will be earned in the future.

So: avoid caught by one tax avoidance rule by declaring an illegal dividend because you’re less likely to be caught...on what basis?

IMO HMRC would see this for what it is. With out a legally declared dividend I’d expect HRMC to still apply s455 on the basis that it is a continuation of the previous loan.