Overdrawn Director's Loan Release Waiver

lizzie4

Hello All

I hope everyone is keeping safe and well.

I am preparing accounts for a company (sole director and shareholder). The DLA is overdrawn and there are no reserves, so I plan to waive the loan. I am aware that the figure will need to be included on the director's self assessment as a deemed distribution and disclosed on the additional pages, the loan must be formally waived and there will be no corp tax relief re the written off loan. My question is where do I debit, Director's salary (and then HMRC may challenge it as salary) or equity dividends or something else?

Many thanks in advance
Liz

Pian32

Hi Lizzie

I haven't come across the full writing off of a directors loan but came across this from the ACCA site:

https://www.accaglobal.com/sg/en/technical-activities/technical-resources-search/2012/august/directors-loan-account.html#:~:text=The company can write off,2005 as a deemed dividend.

Number 9 I think is what you are dealing with. It might be better (if the profits are there) to use an official dividend instead since they are the only share holder.

Someone with more familiarity might be able to give more advice.

lizzie4

Thank you Pian.