Writing off a Directors Loan

GBooks Registered Posts: 7 Regular contributor ⭐ 😼 ⭐
Hi All

I have recently taken on a client who as an overdrawn directors loan of £7500 this relates to year end 31/12/07 - He is already late filing his accounts for this year due to another accountant not completing them on time hence why the client as come to me. As the director cannot payback the dla because the 9 months point is well passed, he can't take the extra through payroll as this yearend as also passed and the company made a loss so no dividend is available to pay either so he is faced with either paying the extra taxes or writing off the loan. I'm a fairly new MIP and I was just looking for some advice on writing off a dla and its implications please as this is not something I have experience in but it is something my client is asking about.



  • deanshepherd
    deanshepherd Registered Posts: 1,809
    Things to consider:

    - Assuming the director is also a shareholder then the write off is treated for tax purposes as an income distribution.

    - It is treated as earnings for NI purposes so there will be both employees and employers NI to pay at the date of the write off.

    - If you are well past the 9 months then writing off the loan is not going to save the S.419 tax. You cannot backdate the write off any more than you can back date a dividend to clear the overdrawn loan account.

    I would generally avoid this course of action if possible.
  • GBooks
    GBooks Registered Posts: 7 Regular contributor ⭐ 😼 ⭐
    Thanks for your help Dean, you have just confirmed what I thought! :thumbup1:
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