Accountants Question..
Discussion
You do realise that you are breaking the law? 
If the "company" (which I presume is "you" in reality) decides to be generous and not ask you to pay this money back to the company, the following will result:
i) a declaration in the accounts MUST be made to this effect - usually in a Note to the accounts
ii) the Revenue will keep forever the Section 419 Corporation Tax you will have paid over to them when submitting the accounts and Corporation Tax return for the year in which the loan was made to the director (I presume you have paid the Section 419 tax?)
iii) the loan will be written off as a charge to the company's profit and loss account. However, this "Expense" will not be allowed as a legitimate deduction when computing the company's Corporation Tax liability and will therefore be ignored in the tax computation.
iv) I presume that the loan was made to the director "interest free". If the loan balance was in excess of £5,000 at 5 April, then the fact that an interest free loan exists/existed needs to be declared on the P11d (Director's Benefits in Kind and Expenses). Failure to declare this correctly on the P11d could result in a £3,000 penalty.
Your PAYE Coding will be amended so that you pay the correct Income Tax on the Taxable Benefit of an Interest Fee Loan from your employer.
Obviously, this will cease once the loan has been written off but you could also be liable to PAYE and NI (Employee's and Employer's) on the balance of the loan written off.
Hope that helps - and I hope your accountant is fully aware of all these issues.
If the "company" (which I presume is "you" in reality) decides to be generous and not ask you to pay this money back to the company, the following will result:
i) a declaration in the accounts MUST be made to this effect - usually in a Note to the accounts
ii) the Revenue will keep forever the Section 419 Corporation Tax you will have paid over to them when submitting the accounts and Corporation Tax return for the year in which the loan was made to the director (I presume you have paid the Section 419 tax?)
iii) the loan will be written off as a charge to the company's profit and loss account. However, this "Expense" will not be allowed as a legitimate deduction when computing the company's Corporation Tax liability and will therefore be ignored in the tax computation.
iv) I presume that the loan was made to the director "interest free". If the loan balance was in excess of £5,000 at 5 April, then the fact that an interest free loan exists/existed needs to be declared on the P11d (Director's Benefits in Kind and Expenses). Failure to declare this correctly on the P11d could result in a £3,000 penalty.
Your PAYE Coding will be amended so that you pay the correct Income Tax on the Taxable Benefit of an Interest Fee Loan from your employer.
Obviously, this will cease once the loan has been written off but you could also be liable to PAYE and NI (Employee's and Employer's) on the balance of the loan written off.
Hope that helps - and I hope your accountant is fully aware of all these issues.
Edited by Eric Mc on Monday 2nd June 13:57
Gassing Station | Business | Top of Page | What's New | My Stuff