Directors loan repayment rules and charges

[Greg@CapitalCity]

Your accountant may have been referring to making entries in in the CT600 supplement for S445 tax, even though no S445 is due. Its a badly designed process (and form!) but the theory is this;

If an June 2012 you have a £5k loan outstanding, then an entry will go in your tax return for the loan, generating a S455 tax charge;
If the loan is then repaid before Mar 2013, then a further entry is made in the CT600 supplement, showing a refund of the S455 charge. No money needs to change hands for this as you hold off filing the CT600 until the loan is repaid, its just a bit of paperwork;
And if the loan is still unpaid after Mar 2013, you know what happens - the 25% charge kicks in;

[prozak]

Just put the money back in before year end.

Less hassle. Less worries.

[northernladuk]

Don't wanna be rude here but you seem to have been having problems with your accountant from September on a number of different items.

Do you not think it is about time for a change? Why not pick one from here that actually answers your questions properly and promptly and does the job right first time?

[Clare@InTouch]

So if I pay 5k before March 2013 > No charges (Considering that whatever I pay to HMRC, I am definitely getting back)?

Because the accountant is like its upto HMRC to pay back and he cannot comment on this?

If you pay back after March 2013 then you reclaim the money from HMRC after you repay the loan, simply by writing to them to request it back. If you repay in the year to June 2013, you'd be able to reclaim in March 2014 (9 months after the year end in which you repay).

[northernladuk]

I had an odd situation at year end when I had to use the directors account due to some issue with the fact I invoiced one year and divi'd next which means I would have gone over 5k limit if I had used loan account.

Maybe they used it to balance the books and there were other ways around it, can't remember now but puts me off carrying the 5k over year end now.

[legal]

If you repay the loan within 9 months of the year end then there's no Section 455 (the new s419) tax. June 2012 + 9 months is March 2013.

If you don't pay the loan back there will be an extra CT charge equal to 25% of the loan balance, which you can reclaim from HMRC in the year you repay the loan.

There's also the benefit in kind charge to consider, unless you pay interest on the loan.

So if I pay 5k before March 2013 > No charges (Considering that whatever I pay to HMRC, I am definitely getting back)?

Because the accountant is like its upto HMRC to pay back and he cannot comment on this?

[Clare@InTouch]

If you repay the loan within 9 months of the year end then there's no Section 455 (the new s419) tax. June 2012 + 9 months is March 2013.

If you don't pay the loan back there will be an extra CT charge equal to 25% of the loan balance, which you can reclaim from HMRC in the year you repay the loan.

There's also the benefit in kind charge to consider, unless you pay interest on the loan.

[legal]

Hi All, Once again I haven't got clear info from my accountant regarding this and hence here is my simple question...

I need to withdraw £5k from ltd company as a director.

Company financial "year end": June 2012

As I understand, I need to pay back this loan in full before "Year end" + 9 months.
So if I pay back before March 2013 there is no charge.

But the accountant has confused me saying...

" The company would have to pay a corporation tax deposit of 25% to HMRC as a 'S419' charge, until the loan is paid back to the company. If the loan is paid back to the company before the company period end, the S419 charge is not due but the below will still apply."

So what accountant is saying is, I should pay back loan before company's financial year end, and If I don't then S419 should be declared.

Then if I pay back before March 2013, I need to contact HMRC and inform them I have paid back. Its upto HMRC to refund me whatever charge I paid when we declared S419...