Reply to: Paying back Loan

[WordIsBond]

Not passing judgment on your actions or your knowledge. Just telling you what your first post sounded like.

yes I know with %

Not if less than 10K. Sounds like babe in the woods.

would the monthly payment back trigger CT tax as well

Shows complete ignorance as to what a loan is. Also shows complete ignorance, if you are paying back interest, as the different treatment of interest and capital/principal repayment.

I'm glad you check with your accountant first, and there's nothing wrong with asking on a forum first. It lets you assess whether your accountant is giving you straight answers (they do get things wrong) and sometimes even helps you know which questions to ask. I wouldn't discourage you from doing that. But you might have had a more pleasant ride of it if you'd done a little more research before asking and so been able to avoid sounding quite so ignorant. That's a red rag to a bull to our more aggressive forum watchdogs.

[SandyD]

OP, your original post sounded like you had engaged in a course of action whilst having very serious gaps in your knowledge. That course of action has caused a lot of trouble for a lot of people precisely because they followed it without knowing all the ramifications.

Nope, I asked before any action, actually I wanted to know the answer before speaking to my tax advisor... I have now - in writing his reply, and will have a meeting with him in the next few week... I never action things without his advise.

You got your answer. And you got push-back. IMO, you deserved both, based on your original post. If the original post didn't fully reflect how much you know about the topic, that's hardly the fault of other posters. You sounded like a babe in the woods about to get eaten by a big bad wolf. Instead, you got barked at by the friendly neighbourhood dog telling you to get back to a safe place. Maybe you had a gun in your pocket and were ready to slay the wolf, but he couldn't know that from what you said.

Woof, woof.

Heh excuse me.. yes I didn't know that CT tax is only on the %... because actually I never took a director's loan of any significant and not paid it back within a short period ... but hey you can pass your judgement freely on me, its totally your prerogative... am used to this forum and people attacking each other for daring to ask a question.. eat my shortslol... I asked the question on the accounting forum.. and wont stop asking cuz your judgements don't deter me...

[WordIsBond]

I never understood who wants to do the bed and breakfasting concept?

Somebody who doesn't really have £10K free, but can scrape it together for a few days.

Maybe they have a mortgage payment of £1.5K due on the 5th and a car payment of £500 on the 10th and they have £5K in their bank account. They borrow £5K from Mum & Dad for a few days, pay off the £10K loan on the 30th, then borrow it back on the 2nd. Pay Mum & Dad back and they have the money for their mortgage and car payment. Sorted.

But HMRC says no, that's bed and breakfasting, you haven't really paid that loan off, it's a fiction. Has to be paid off for at least a month before you can borrow it again.

[WordIsBond]

OP, your original post sounded like you had engaged in a course of action whilst having very serious gaps in your knowledge. That course of action has caused a lot of trouble for a lot of people precisely because they followed it without knowing all the ramifications.

You got your answer. And you got push-back. IMO, you deserved both, based on your original post. If the original post didn't fully reflect how much you know about the topic, that's hardly the fault of other posters. You sounded like a babe in the woods about to get eaten by a big bad wolf. Instead, you got barked at by the friendly neighbourhood dog telling you to get back to a safe place. Maybe you had a gun in your pocket and were ready to slay the wolf, but he couldn't know that from what you said.

Woof, woof.

[SandyD]

You still have to be wary of bed and breakfasting though. Paying it back before year end to keep it off your books and then take it out straight away again will still fall foul of the new rules as per the bottom half of this link.
What is a Director's Loan Account? We Explain The Rules | Crunch

I never understood who wants to do the bed and breakfasting concept? Like why take 10K then return it again if you haven't used it to do something useful or invest in something?? Unless people just leave it sitting in an account that will bring them better % or perhaps for an offset mortgage... but I was talking originally about loans one take to invest in something personal...

The original question was answered... when you pay back the loan you only pay CT on the % charged

[pr1]

OK. That is a good point yes but it's a well documented and approved process so there is no harm in it being there. It's only a carry over like depreciation and all that. There is no reason at all to pay it back just to avoid this. But your point is right.

You still have to be wary of bed and breakfasting though. Paying it back before year end to keep it off your books and then take it out straight away again will still fall foul of the new rules as per the bottom half of this link.
What is a Director's Loan Account? We Explain The Rules | Crunch

Granted harder for them to spot but you really don't want to be running your finances to the point you are 'getting away with it' because HMRC didn't spot it. Come an investigation they'll spot it OK.

Agreed

[northernladuk]

Not completely irrelevant imo

As I understand it from seeing my accounts vs a friends' accounts, both using the same accountant (& the same accountant as you)...

Assuming March is end of year, if the loan is fully repaid 31st March it would not get mentioned in the end of year accounts, if it was paid back on 1st April it would appear as "At end of year there was a directors loan of XXX outstanding at end of year, which was subsequently repaid on 1st April" (or similarly worded line)

Whether or not you consider that relevant I guess is subjective but one would leave no trace on companies house['s publicly view-able records], and one would

OK. That is a good point yes but it's a well documented and approved process so there is no harm in it being there. It's only a carry over like depreciation and all that. There is no reason at all to pay it back just to avoid this. But your point is right.

You still have to be wary of bed and breakfasting though. Paying it back before year end to keep it off your books and then take it out straight away again will still fall foul of the new rules as per the bottom half of this link.
What is a Director's Loan Account? We Explain The Rules | Crunch

Granted harder for them to spot but you really don't want to be running your finances to the point you are 'getting away with it' because HMRC didn't spot it. Come an investigation they'll spot it OK.

[pr1]

Mentioning year end again, which is irrelevant. Now in this post this could be your choice which I admit. But you've still mentioned year end multiple and never once getting the rule correct. It's a safe assumption that you still have understood the rules.

Not completely irrelevant imo

As I understand it from seeing my accounts vs a friends' accounts, both using the same accountant (& the same accountant as you)...

Assuming March is end of year, if the loan is fully repaid 31st March it would not get mentioned in the end of year accounts, if it was paid back on 1st April it would appear as "At end of year there was a directors loan of XXX outstanding at end of year, which was subsequently repaid on 1st April" (or similarly worded line)

Whether or not you consider that relevant I guess is subjective but one would leave no trace on companies house['s publicly view-able records], and one would

[SandyD]

P.S. Listening to other contractors is a very bad thing in general.

Agree, perhaps we shouldn't be listening to you until you calm down... I believe your aim now is just to annoy and derail the thread....

[northernladuk]

Sorry Simes, and everyone else who is probably sick of watching us banter but I can't let this one pass.

FFS.

Now really, how many times have we talked about your reading (into) something entirely Other than that which the writer has posited? There is some very slow learning involved here.

In your case very slow.

I had admitted to the outdatedness of the spreadsheet. From that point on, how I, or indeed anyone else works is entirely up to them. It does not require your derision and scorn. Ever.

Where was the scorn? I pointed some stuff out in a factual way, no scorn.

As to the loan, I never said, nor inferred, that I Had to pay Anything back before year end. Simply that something had been borrowed, and same something would be paid back in March. As far as my own needs are concerned, everything is covered. So please, find something else, preferably someWhere else, to concern yourself over.

So going back slightly you put

Can I ask the value of your loans? I ask only as anything sub £10k stays below HMRC radars if paid back within the year.

Which is wholly wrong. You then put

Not sure I understand as I said, 'if paid back within the year'.

Perhaps I should have specifically said 'year end'. For which, apologies.

This bit, "If the loan is repaid within 9 months of the year end then the S.455 reduces proportionally (at the 32.5% rate), likewise S.455 can be reclaimed from HMRC on the eventual repayment of the loan, even if several years (and tax returns) after the loan was issued." I will definitely have to run by the accountant...

The first part is still wrong and you've shown you've no idea how it works in the bottom thread. And then you put

And, for the first time ever, I have just taken a £5k director loan in January, that will be paid back in March. (Which is before my YE)

Mentioning year end again, which is irrelevant. Now in this post this could be your choice which I admit. But you've still mentioned year end multiple and never once getting the rule correct. It's a safe assumption that you still have understood the rules.

Your sub 10k loan has to be paid back within 9 months after the years end. The year end is irrelevant. If you took it out in April you can have the loan for a total of 21 months before it needs paying it off. If you take it in mid March when you year end is end of march you do not need to pay it back for another 9 months 2 weeks i,e December in the next company year.

You may know this but your posts don't mention this which is very confusing for someone reading this that is trying to understand.

Slate away but the above is all facts and is in black and white.

And on that note I'm done with this thread. People are probably bored of me banging on which I can appreciate so I'll let it be.

[SandyD]

I wish you'd **** off with your attitude. You mention something and we discuss it. It's as a forum works as you've already pointed out. 'We' don't know, you do. If you don't want it discussing don't post it. Nothing wrong with posting that new information but drop the attitude.

Same to you too NLUK.

[northernladuk]

Sigh !!! again we know its not tax efficient, but she needed the money.. if we go and borrow the money from a bank etc, we still have to pay even higher interest on it etc... yes she is actually a trained accountant, and she knows she had to pay a very high SA tax bill.

I wish you'd **** off with your attitude. You mention something and we discuss it. It's as a forum works as you've already pointed out. 'We' don't know, you do. If you don't want it discussing don't post it. Nothing wrong with posting that new information but drop the attitude.

[SandyD]

Were these under 10k? Was she repaying them wholly? HMRC could easily look at that and deem it's income unless done very very carefully.

I assume in this case that she was aware this was likely to be completely inefficient due to the extra tax on the divis but was more a means to an end than an exercise to get cheap efficient money?

P.S. Listening to other contractors is a very bad thing in general. I've heard stories that would make you cry (either laughing or in sheer frustration). The contractor who's accountant advised he can buy a Porsche 911 on the company, depreciate it and claim the payments as an expense. He didn't get caught and tells everyone how he did to much wide eye'd admiration. Makes my blood boil.

Sigh !!! again we know its not tax efficient, but she needed the money.. if we go and borrow the money from a bank etc, we still have to pay even higher interest on it etc... yes she is actually a trained accountant, and she knows she had to pay a very high SA tax bill.

[GreenMirror]

NLUK has provided invaluable advice to myself and many other posters. He is very blunt which I personally prefer - why do people want sugar coatings?

Still, if it helps to shoot the messenger.....

[simes]

FFS.

Now really, how many times have we talked about your reading (into) something entirely Other than that which the writer has posited? There is some very slow learning involved here.

I had admitted to the outdatedness of the spreadsheet. From that point on, how I, or indeed anyone else works is entirely up to them. It does not require your derision and scorn. Ever.

As to the loan, I never said, nor inferred, that I Had to pay Anything back before year end. Simply that something had been borrowed, and same something would be paid back in March. As far as my own needs are concerned, everything is covered. So please, find something else, preferably someWhere else, to concern yourself over.

I read in some other Remote Working thread that, Not working in an office would not really work for you as you need to Speak to People... Poor 'people', I thought.