Directors Loan £5k
Discussion
IIRC you cannot carry a negative balance in your DLA over an accounting year....without needing to pay a commercial rate of interest on it and showing this in the Accounts. I believe this interest can be paid by the Company (to itself) but will need to be declared as a benefit in kind and you will pay tax on it.
The balance will either need to be paid back or a Dividend or PAYE payment made to cover it - i.e. instead of you writing the Company a cheque it just doesn't pay you.
Eric can better advise. But running a negative DLA does tend to get the Revenue interested as if payments are made...then tax is due...and there's no getting away from it.
The balance will either need to be paid back or a Dividend or PAYE payment made to cover it - i.e. instead of you writing the Company a cheque it just doesn't pay you.
Eric can better advise. But running a negative DLA does tend to get the Revenue interested as if payments are made...then tax is due...and there's no getting away from it.
The £5,000 limit is a PAYE Befit in Kind declaration limit i.e. if the loan at no point exceeded £5,000 in any given tax year, it does not need to be declared on the PAYE end of year declaration form for Benefits in Kind, the P11d.
Company Law and Corporation Tax law has a different stance.
Simply, put, as far as they are concerned, it is illegal. If the company has loaned money to a director (or a connected person) it MUST be declared (together with all the related terms and conditions) in the Notes to the formal financial statements as filed at Companies House.
Secondly, if the loan remained unpaid at the company's balance sheet date, HMRC will expect the company to pay Section 419 Corporation Tax calculated at 20% on the loan balance outstanding at the balance sheet date. This Corporation Tax should be paid over as part of the normal Corporation Tax bill but it will be refunded if and when the loan is eventually reduced or cancelled altogether.
Company Law and Corporation Tax law has a different stance.
Simply, put, as far as they are concerned, it is illegal. If the company has loaned money to a director (or a connected person) it MUST be declared (together with all the related terms and conditions) in the Notes to the formal financial statements as filed at Companies House.
Secondly, if the loan remained unpaid at the company's balance sheet date, HMRC will expect the company to pay Section 419 Corporation Tax calculated at 20% on the loan balance outstanding at the balance sheet date. This Corporation Tax should be paid over as part of the normal Corporation Tax bill but it will be refunded if and when the loan is eventually reduced or cancelled altogether.
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