DLA's!

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ademoore
ademoore Registered Posts: 146 Dedicated contributor 🦉
in General accounting discussion
Any one have any ideas how to get a director loan reduced, without affecting profits?
Have a client who basically took too much in dividends during the year, and so have maxed the profits as dividends, and tucked the remainder in DLA.
DLA is over the £5k mark by £2k but I'm out of ideas how to reduce any further?
I have told the client that if he had the money, he then has to pay the tax, simple, but deep down I'm still seeking for any methods I have missed.
Thanks.

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  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    I don't think you've missed anything.
    If it's still over (by any amount) after 9 months he will need to pay the 25% s455 tax.

    If it's over 5k he has the choice of paying personal tax on P11D and company paying Class 2NI, or you have the choice of adding the beneficial loan interest to his DLA balance (or him actually paying that into the company). Depending on his personal tax situation should dictate which of these is preferable.
  • deanshepherd
    deanshepherd Registered Posts: 1,809 Beyond epic contributor 🧙‍♂️
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    How about the personal assets he introduced into the business, home office rent, business mileage, business expenses he paid for personally..
  • ademoore
    ademoore Registered Posts: 146 Dedicated contributor 🦉
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    Thanks Dan, been through those!

    Monsoon, thanks to you too, I am not clear on your option of "or you have the choice of adding the beneficial loan interest to his DLA balance (or him actually paying that into the company). Depending on his personal tax situation should dictate which of these is preferable." Could you explain this one more, I havent come across this option!?

    Thanks to you both!
  • Monsoon
    Monsoon Registered Posts: 4,071 Beyond epic contributor 🧙‍♂️
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    I didn't think about the stuff Dean mentioned because I take all that stuff for granted as being done!

    Ade, there are 2 separate issues with an overdrawn DLA. One is the s455 tax. The other is a loan of over 5k outstanding at any time, which gives a BIK of interest on a beneficial loan.

    The BIK is taxable on the director at his rate of income tax, and on the company as class 1A NIC.

    There is no BIK if the director actually pays interest on the loan. Thus the director could actually pay the interest at the recommended HMRC rate and avoid the BIK taxes.

    I discussed the pros and cons of this here but nobody replied (boohoo)
    http://forums.aat.org.uk/showthread.php?t=31035

    I would really welcome comments on it as I'm still unsure whether I've missed anything.

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