Very short director's loan?

[Wanderer]

Bearing in mind that the company money is not my money, what would you do if you knew your personal account was going to be heavily overdrawn due to cocking up dates on payments, and you had money in the company account?

Have a shareholder meeting where it's decided that the you will take a director's loan and write up the meeting minutes. Be sure to pay it back with 4% interest before the company year end so you don't have to declare it on the company's tax return and there shouldn't be any BIK.

If you fail to pay it back by the end of the year then you have to declare it and if it's still outstanding 9 months after the year end then you don't have to pay the 25% tax charge on it.

[Moscow Mule]

Oh, and to the OP - if the loan is over £10k, you have to have the shareholders agreement to make the loan - so don't forget your paperwork.

[Moscow Mule]

I was of the understanding.....

A penny over 5K and the whole lot attracts BIK regardless of duration. It is paid back with 9 months of month end.

I would guess if Clare does mean no BIK in a month is due to allowances for calculation of BIK rather than any official edict allowing it.

It is the interest which is the BIK, not the principal amount.

If you borrow £10k at the official rate (say 4%) for a year, and repay the company £10400, then there is no BIK.

If you were to take £10k (assume 4%), for a month, your BIK would be £33, so you'd pay 40% of that and the company would pay 12.8%.

The 9 month thing is about the 25% CT charge - which is to persuade directors not to take massive loans for their own use.

Source: http://www.indicator.co.uk/upload/UKCDMABK_sample.pdf

[jamesbrown]

I was of the understanding.....

A penny over 5K and the whole lot attracts BIK regardless of duration.

That's my understanding also, although it's based on cursory reading. It's dealt with in Ch. 17 of 480 (Expenses and benefits). I can't see any exemption for duration, but an (aggregate) loan of 5k or more is covered (Section 180(1)):

"No tax is chargeable if the total balance outstanding on all beneficial loans does not exceed £5,000
throughout the year of assessment in question. This means that, in strictness, where this exemption
could be applicable it will be necessary to calculate and consider the total balance outstanding on all
an individual’s beneficial loans on a day to day basis." [....]

[northernladuk]

WHS

'Mistakes' happen all the time. Have you got a CT bill or VAT bill outstanding? Pay yourself by mistake then correct it in a few days time.

Get creative

Even though I don't like messing with expenses and tax I would probably take this approach... that or ring the bank and see if they will authorise the overdraft in this one case.

[northernladuk]

So is there any BIK if it is more than 5K, but less than one month. I couldn't find any resources on the 'one month' aspect.

I was of the understanding.....

A penny over 5K and the whole lot attracts BIK regardless of duration. It is paid back with 9 months of month end.

I would guess if Clare does mean no BIK in a month is due to allowances for calculation of BIK rather than any official edict allowing it.

[centurian]

Apart from the creative option, there's nothing wrong with doing a short term loan. If it's outstanding less than a month then there's often no benefit in kind, and again no BIK if it's under £5,000.

Or charge yourself interest at 4%, then there's no BIK either. Just make sure it's repaid within 9 months of your year end to avoid extra CT.

So is there any BIK if it is more than 5K, but less than one month. I couldn't find any resources on the 'one month' aspect.

[Vallah]

Apart from the creative option, there's nothing wrong with doing a short term loan. If it's outstanding less than a month then there's often no benefit in kind, and again no BIK if it's under £5,000.

Or charge yourself interest at 4%, then there's no BIK either. Just make sure it's repaid within 9 months of your year end to avoid extra CT.

As ever, perfect accounting advice from Clare.

[Clare@InTouch]

Apart from the creative option, there's nothing wrong with doing a short term loan. If it's outstanding less than a month then there's often no benefit in kind, and again no BIK if it's under £5,000.

Or charge yourself interest at 4%, then there's no BIK either. Just make sure it's repaid within 9 months of your year end to avoid extra CT.

[MrRobin]

WHS

'Mistakes' happen all the time. Have you got a CT bill or VAT bill outstanding? Pay yourself by mistake then correct it in a few days time.

Get creative

[Sockpuppet]

Bearing in mind that the company money is not my money, what would you do if you knew your personal account was going to be heavily overdrawn due to cocking up dates on payments, and you had money in the company account?

Options include issuing a dividend you hadn't planned, or issuing a director's loan for about 24 hours, I think? Is it worth the hassle to avoid £30 in fees - does a loan have to be formally issued or could one even get away with moving the money for a day and then returning it... again I know company money isn't mine to play with so what is the situation here?

Grr, hate it when you are normally organised and then one thing is out by a day and screws the whole thing up!!!

You could always pay yourself £100 in mileage or salary and make a mistake paying £10000 into that account. WHen you realise transfer back the £9900 and note it in the accounts.

[d000hg]

Bearing in mind that the company money is not my money, what would you do if you knew your personal account was going to be heavily overdrawn due to cocking up dates on payments, and you had money in the company account?

Options include issuing a dividend you hadn't planned, or issuing a director's loan for about 24 hours, I think? Is it worth the hassle to avoid £30 in fees - does a loan have to be formally issued or could one even get away with moving the money for a day and then returning it... again I know company money isn't mine to play with so what is the situation here?

Grr, hate it when you are normally organised and then one thing is out by a day and screws the whole thing up!!!