Tax on Director's Loan

MyriamMyriam New MemberDevonPosts: 10FMAAT, AAT Licensed Accountant
Hi

I am a little confused about corporation tax charges on outstanding Director's loans.

I had been under the impression that the tax charge was 25% of the full loan value outstanding 9 months and 1 day after CAP end.

So if a Director had an outstanding loan balance two years in a row they would be paying CT on it both years...?

However, I've received a client's previous accounts where the CT charge on the loan was only the additional part advanced in the year, and not on the amount b/f.

What is the correct tax charge here? If a loan remains outstanding two years in a row is 25% tax charged both years, or just the first year?

It makes sense that it is only taxed once, but whatever I read seems to say it's on the outstanding loan amount...

Thanks

Comments

  • MyriamMyriam New Member DevonPosts: 10FMAAT, AAT Licensed Accountant
    think i've worked this out logically myself.

    They only pay back 25% of the loan repaid in tax, so I guess they've only ever charged 25% tax on it once, not every year.

    Now just need to work out the P11D taxable benefits implications of a very large long running loan. ARGH!
  • readerreader Experienced Mentor Posts: 1,039MAAT, AAT Licensed Accountant
    Myriam wrote: »
    Hi

    So if a Director had an outstanding loan balance two years in a row they would be paying CT on it both years...?


    Thanks

    no- not in both years, i.e.

    2010: DLA is overdrawn by £6,000, therefore £6,000 x 25% = £1,500 of S.455 tax due
    2011: DLA is overdrawn by £6,000, no S.455 tax is due (as no additional loan)
    2012: DLA is overdrawn by £7,000, therefore £1,000 x 25% = £250 of S.455 tax due
    2013: DLA is in credit, therefore all S.455 is repayable, i.e. £1,500 + £250 = £1,750 refund
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