Overdrawn directors loan account

zephyr

I know this has been discussed many times on the forum, and I have read all the replies ( I hope) but could some one please clarify for me:

If the DLA is overdrawn for more than one accounting year is the S442 tax calculated on the whole amount outstanding again?

ie Overdrawn £30,000 ye 30.9.15 - not repaid- so S442 tax paid @ 25% £7500

Additional loan taken out 30.12.15, £30,000, At ye 30.9.16 - now overdrawn £60,000, is the tax calculated on £60,000 or just the additional £30000.?

I am pretty sure I was advised by HMRC that is was just on the additional loan but on reading all the guidance it states on the amount outstanding and no mention of any tax already paid.

Thank you in advance

reader

It's s.455 (not s442) and it's calculated on the additional loan (not the entire outstanding amount).

The tax rate is also 32.5% (used to be 25%)

hal978

There's a benefit-in-kind on the director if the balance is over £10,000 at any time during the year and interest is paid (or unpaid) at less than the official rate.

There's also anti-avoidance provisions in S464 that might be relevant.

zephyr

Thank you for replying and confirm that the tax is on the additional loan ,which does makes sense!

I had realised it was S455 after I had typed it.

The loan was taken out before 6.4.16, which I had read was taxed at 25% and only at 32.5% if after 6.4.16.

P11ds have been submitted for the benefit in kind.

It is so good to get a quick second of opinion when you are sat on your own and suddenly have a panic moment!

reader

hal978 said:

There's a benefit-in-kind on the director if the balance is over £10,000 at any time during the year and interest is paid (or unpaid) at less than the official rate.

There's also anti-avoidance provisions in S464 that might be relevant.

Are you going to do ACCA after AAT?

hal978

No, I won't be doing ACCA.

reader

CIMA? ATT? ACA? Enjoying Life?

Your exam scores are really high.

hal978

Thank you for the compliment!
I haven't decided about ACA yet. There are so many exams and I only get a few exemptions as I started on Level 4 instead of Level 3. My employer is also not ACA qualified so I have to change jobs.

reader

hal978 said:

Thank you for the compliment!
I haven't decided about ACA yet. There are so many exams and I only get a few exemptions as I started on Level 4 instead of Level 3. My employer is also not ACA qualified so I have to change jobs.

If you like tax ATT and CTA is a good route.

Otherwise you could do ACCA/ACA. It is probably easier to do ACCA. I believe once you are a member of ACCA for 5 years you can apply for ACA membership without having to do any of the ACA exams.

MooreAccounts

Hi all,

Sorry for hijacking the thread- but needs must! Had a bit of a brainfreeze!

Year end is 31/05/2017. Director loan of £12428 in the period so have charged 32.5% on top. as per the GOV website.

With regards to the P11D, it's my understanding that the P11D for the period would have been due in July 2017. As this is long passed, is it simply a case of adding it onto the next P11D, due July 2018? I assume the DL of £12428 would have to be pro-rata'd for the period ending April 2018?

Thanks in advance

MarieNoelle

Hi @MooreAccounts
If the BIK occurred in the 2016-17 tax year the class 1A NIC was due in July 2017 so a late P11D(b) would need to be filed.
The good news is that the late filing penalties are capped at the tax liability.
The bad news is you would have to file an amended SA tax return for the director to include the benefit.

MooreAccounts

Thanks @MarieNoelle !

leeGrant77

I know this is an old thread but im sure these issues are faced daily by us all.
I have a similar issue insofar as the sole director and shareholder had an overdrawn loan account at 80k at year end Nov 19.
The S455 tax was paid and year end Nov 20 the DL is down to 50k.
I would be correct in my thinking that we can reclaim the S455 paid on the reduction of loan, ie - 32.5% on the 30k repayments, assuming bed and breakfasting rules aren't breached.
Noelle seems to be the voice of reason here so would be great to hear her views