Directors Loan of Less than £5k

[chonok]

I currently have a directors loan withdrawn from the company of £5k.

We planned to pay this back before the 9 month accounting period ends - pretty straightforward and no tax implications as far as i'm aware.

Something has now come up whereby we could do with the £5k for something else. Therefore I could do with knowing what the implications are if the loan isn't repaid within the 9 months?

Had a look on the .gov website, but it doesn't really make sense to me. Will it simply be classed as a dividend and therefore attract 7.5% dividend tax?

Thanks for all your help. Please no unhelpful 'just as your accountant comments'

Obviously there is no immediate financial danger to the company if the £5k isn't repaid.

[FredClogs]

If you want to pay it ad a dividend then just do a dividend certificate and get on with your life (assuming the company can afford to pay a dividend) It's the best way to clear the loan off, I believe.

An accountant will be along shortly to tell you the actual cost of leaving it as a loan across the year end, I believe the implications are quite costly.

[KevinCamaroSS]

Other options include paying it back now, if close to year end and taking another one next year. Alternatively add a credit card into the mix between paying it back and taking a new one?

[Eric Mc]

KevinCamaroSS said:

Other options include paying it back now, if close to year end and taking another one next year. Alternatively add a credit card into the mix between paying it back and taking a new one?

"Bed and breakfasting" is not allowed and, if HMRC spot it going on, will take action.

At the moment this is hard for HMRC to detect. But guess why (from April 2020) they will want companies to start filing their business transactions (in detail) every quarter

[Si1295]

20% tax on the outstanding loan amount to be paid by the company every year until it has been paid off, then you can claim it back

[chonok]

Thanks guys.

[Eric Mc]

The S455 CT tax paid is a one off payment. You only have to pay additional S455 CT if the loan balance gets worse.

S.455 CT is eventually recoverable from HMRC - once the company can prove that the overdrawn director's loan account has been cleared in full.

This can be a long drawn out process. I have just completed a case where S.455 (formerly S.419) CT was paid back in January 2007 and was only recovered in January 2017 - TEN YEARS LATER.