How do you repay director's loan with dividends?

[pscont]

How can this be done?
Do you only issue a divi voucher after director meeting, but never transfer the divi money out of ltd account? If it is say 50% of the loan when you repay the rest do you do anything special in the accounts to show where the difference is..

[northernladuk]

Create a journal entry?

You using Freeagent? Here's a link explaining

https://community.freeagent.com/free...s_loan_account

It would be a good idea to ask your accountant about it all though. You don't want to be dicking around with loans if you aren't sure what you are doing.

Not sure why I have a sneaking suspicion you are trying to carry out some ill thought out elaborate tax dodge again though.

[Alchemy Accountancy]

How can this be done?
Do you only issue a divi voucher after director meeting, but never transfer the divi money out of ltd account? If it is say 50% of the loan when you repay the rest do you do anything special in the accounts to show where the difference is..

The dividend needs to be minuted in the company's books and a tax voucher issued to shareholders, this applies whether it is paid in cash or simply credited to the directors loan account. If you use FreeAgent, the software will take care of this for you with a journal, if not then there are plenty of templates around.

If the loan is outstanding at the end of the accounting period then you will need to declare it on a CT600A. If any portion of it then remains outstanding 9 months after the end of the accounting period, then you will be liable to S.455 at 32.5% of the amount outstanding. This tax can be reclaimed from HMRC once the loan has been repaid.

Irrespective of when in your accounting cycle the loan is outstanding, if it exceeded £10k then you will need to either pay interest to the company or declare the loan on a P11D and pay tax on the deemed interest.

There are ‘bed and breakfasting’ rules to prevent you from repaying a loan and taking a new one soon after by way of avoiding tax.

[pscont]

The dividend needs to be minuted in the company's books and a tax voucher issued to shareholders, this applies whether it is paid in cash or simply credited to the directors loan account. If you use FreeAgent, the software will take care of this for you with a journal, if not then there are plenty of templates around.

I dont use freeagent. I always had divi vouchers issued based on the minutes as a doc file template.
So is it enough to have the minutes/divi voucher but the money not to leave the ltd account?

[northernladuk]

I dont use freeagent. I always had divi vouchers issued based on the minutes as a doc file template.
So is it enough to have the minutes/divi voucher but the money not to leave the ltd account?

No. You need to transfer it to your account and then pay it back in. At least twice to be absolutely sure.

And get an accountant that uses FA... And speak to them.

[NotAllThere]

Declare a dividend as normal, with the usual postings in your accounts, and transfer the dividend to your personal bank account. Transfer the money to repay the directors loan from your peronal account to your company account, and post it to the DL account.

Or you can just skip the transferal of money between company and personal bank accounts. It's the postings that matter. If I had 10K owed to the company as a result of directors loan and issued a 20K dividend, I'd only actually transfer 10K to my personal bank account.

[Craig@Clarity]

Declare a dividend as normal, with the usual postings in your accounts, and transfer the dividend to your personal bank account. Transfer the money to repay the directors loan from your peronal account to your company account, and post it to the DL account.

Or you can just skip the transferal of money between company and personal bank accounts. It's the postings that matter. If I had 10K owed to the company as a result of directors loan and issued a 20K dividend, I'd only actually transfer 10K to my personal bank account.

+1

[Lance]

Or you can just skip the transferal of money between company and personal bank accounts. It's the postings that matter. If I had 10K owed to the company as a result of directors loan and issued a 20K dividend, I'd only actually transfer 10K to my personal bank account.

The other £10k needs top be accounted for as a debit (or is it credit. that always blows my mind) against the loan account.

Double entry (fnarr fnarr yik yik) book-keeping requires every transaction to be entered twice, as a debit in one account and a credit in another. If splitting the dividend payment, as NAT describes, then there will be 4 entries in total.

[Craig@Clarity]

The other £10k needs top be accounted for as a debit (or is it credit. that always blows my mind) against the loan account.

Double entry (fnarr fnarr yik yik) book-keeping requires every transaction to be entered twice, as a debit in one account and a credit in another. If splitting the dividend payment, as NAT describes, then there will be 4 entries in total.

Debit Bank, Credit Loan Account

For the paper dividend transaction it’ll be debit dividends, credit loan account.