Taking a loan from my own ltd company?

[W4NTED]

My accountant is unavailable until next Monday - could ask his 2nd in command but thought you guys might know...

My company has a good surplus of funds available. I'm looking to take out around £10k from the company. Can I take this as a loan - and decrease my monthly dividend by say £50 a month to show its covering the loan repayment?

What complications are there for me / my ltd company in doing this?

[rich1231]

monthly dividend is also known as salary... you will get taxed as such if the tax man ever pays attention.

Yes you can take a Director's loan and should pay it back at the end of the companies FY.

[W4NTED]

rich1231 said:

monthly dividend is also known as salary... you will get taxed as such if the tax man ever pays attention.

Are you saying that anyone with a Ltd company who takes monthly dividends is in potential trouble with HMRC?

I know plenty of people who take monthly dividends - how else would a consultant live if he doesn't take a steady flow of income on a monthly basis?

[zadumbreion]

As I understand it, it is technically illegal for a director to be loaned money from the company, but in practice it's not considered a big deal.

You would of course have to declare it on the P11D if it's over £5K at any point during the tax year, and (assuming it's interest free) you'd have to pay tax on the interest you should have been paying as per the "official" interest rate.

Edited by zadumbreion on Wednesday 23 July 13:45

[spikeyhead]

W4NTED said:

rich1231 said:

monthly dividend is also known as salary... you will get taxed as such if the tax man ever pays attention.

Are you saying that anyone with a Ltd company who takes monthly dividends is in potential trouble with HMRC?

I know plenty of people who take monthly dividends - how else would a consultant live if he doesn't take a steady flow of income on a monthly basis?

You could take a salary. Oh, I see, you'd then have to pay income tax on it, so instead you're taking a salary but calling it a dividend. If you have an inspection then you're likely to get hammered on that one by the tax man for not paying income tax, employers and employees national insurance.

[W4NTED]

spikeyhead said:

W4NTED said:

rich1231 said:

monthly dividend is also known as salary... you will get taxed as such if the tax man ever pays attention.

Are you saying that anyone with a Ltd company who takes monthly dividends is in potential trouble with HMRC?

I know plenty of people who take monthly dividends - how else would a consultant live if he doesn't take a steady flow of income on a monthly basis?

You could take a salary. Oh, I see, you'd then have to pay income tax on it, so instead you're taking a salary but calling it a dividend. If you have an inspection then you're likely to get hammered on that one by the tax man for not paying income tax, employers and employees national insurance.

So how should a dividend be taken - once a year? Would be interesting to hear what others are doing although I doubt anyone would like to comment

[spikeyhead]

W4NTED said:

So how should a dividend be taken - once a year? Would be interesting to hear what others are doing although I doubt anyone would like to comment

I take mine once a year.

[W4NTED]

http://www.ir35calc.co.uk/dividends_calculation_ta...


"How often can dividends be paid?
Dividends can be paid at any time and frequency as long as they are “legal”, meaning paid from company profits after corporation tax together with the correct preparation of documents.

Large companies tend to pay dividends once every quarter, but there is nothing in statute or tax law preventing a company from paying monthly dividends.

Calculation of dividends during the year
To ensure dividend payments are not made in excess of company’s profits after corporation tax, you should keep a monthly running total of the approximate profits generated and restrict any dividend payments accordingly."

[Anatol]

Have a look at

http://www.hmrc.gov.uk/guidance/480.pdf

Chapter 17 and appendix 5 deal with the taxable benefit of interest-free or low-interest loans. Small loans exemption considered at 17.16 and following.

Tol

[JamieBeeston]

Take a dividend annually, but leave it in the directors loan account, then dip in to it as you need to!

J

[Eric Mc]

W4NTED said:

spikeyhead said:

W4NTED said:

rich1231 said:

monthly dividend is also known as salary... you will get taxed as such if the tax man ever pays attention.

Are you saying that anyone with a Ltd company who takes monthly dividends is in potential trouble with HMRC?

I know plenty of people who take monthly dividends - how else would a consultant live if he doesn't take a steady flow of income on a monthly basis?

You could take a salary. Oh, I see, you'd then have to pay income tax on it, so instead you're taking a salary but calling it a dividend. If you have an inspection then you're likely to get hammered on that one by the tax man for not paying income tax, employers and employees national insurance.

So how should a dividend be taken - once a year? Would be interesting to hear what others are doing although I doubt anyone would like to comment

Dividends are a distribution of post tax profits to the shareholders. Therefore, before they are paid out, the Revenue would expect the following procedure to have been carried out:

1) a review of draft interim accounts by the directors to ascertain whether a dividend payment is possible and legal.

ii) the holding of a directors' meeting (duly minuted) to formally approve the dividend amount and payment.

iii) the issuing of a legally correct dividend voucher explaining the details of the dividend, and the associated tax credit, to each shareholder who is receiving a dividend.

If the above procedures have not been followed and, more importantly, supporting documentary evidence cannot be supplied showing that it was followed, the Revenue can argue very easily that the claimed dividend payments were nothing more than "salary" and that the correct PAYE and NI (Employee's and Employer's) should have been calculated and paid over.

Edited by Eric Mc on Wednesday 23 July 18:56

[mouseymousey]

If you've got £10k knocking around the company why not pay it as a dividend?

In answer to your other question, we pay dividends every 3 months after reviewing the accounts, having a board meeting (minuted) and preparing the dividend vouchers.

[Bernie-the-bolt]

I have paperwork prepared and draw a monthly dividend and then once a year a significantly bigger dividend if I've got a lot sloshing about.

I also took out some tens of thousands in February but it was taken as a loan from the company until the end of the current tax year. I then paid a small amount of interest to cover the loan until the end of the tax year then converted it to a dividend and will therefore not pay tax until January 2010 on that element my drawings.

As with monthly dividends, it's all above board and 100% totally legal.

[Eric Mc]

The important thing is not to leave the loan outstanding in the company's balance sheet at the end of the company's financial year. If such a balance remains, it must be disclosed separately in the notes to the account and the Revenue will expect to pay over, as an add-on to the normal Corpration Tax liability, an additional amount of Corporation Tax based on the balalnce of the loan outstanding at the balance sheet date. This extra tax is commonly referred to "Section 419 tax".

It is repayable to the company once the loan is reduced or cleared.

[Olf]

I take divs once every quarter.