Tax on Director's Loan
Myriam
Registered Posts: 10 Regular contributor ⭐
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
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
0
Comments
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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!0 -
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 refund0
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