Director Loan account Overdrawn

amir

One of my client- a director (Sole Director & sole Shareholder) has an overdrawn director loan account by much more than the limit.
Company is not declaring enough dividend to cover that overdraft. I consider treating that as his salary through PAYE. is that the most tax efficient way of dealing with overdrawn DLA or can i do something else? Any Comments Please!!

MarieNoelle

Hi @amir

There are several issues to consider:
1. Was the loan in excess of £10,000 at any time during the tax year? Assuming you have a payroll scheme in place,whether or not you declare a salary now the director may have already incurred a benefit in kind. However the director could repay a notional interest to the company to avoid this. Depending whether you already file a P11D the director may accept to suffer the income tax on the notional interest.Class 1 A NIC will also be due.
2. Will the salary be filed within 9 months and 1 day of the company's year end? if not the company will be liable to s455 tax - although a claim for repayment can be made when the director's loan is repaid (subject to Bed & breakfast rules).

Hope this helps

amir

Thank You @MarieNoelle