Director Loan account Overdrawn
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amir
Registered Posts: 22 New contributor 🐸
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!!
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!!
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Comments
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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
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Thank You @MarieNoelle0
