Paying back Loan

[northernladuk]

Can I ask the value of your loans? I ask only as anything sub £10k stays below HMRC radars if paid back within the year.

Love the way you call me out and the post something that is completely wrong.

[Alchemy Accountancy]

Can I ask the value of your loans? I ask only as anything sub £10k stays below HMRC radars if paid back within the year.

You are correct in that if the loan is below £10k then it would be below the de minimis limit to be treated as a benefit in kind.

However, the bit that NLUK is correct to pull you up on, is that if a loan is outstanding at the year end (irrespective of whether it is bigger or smaller than £10k) then it must be reported on the CT600A and S.455 applied (at 32.5% of the loan). If the loan is repaid within 9 months of the year end then the S.455 reduces proportionally (at the 32.5% rate), likewise S.455 can be reclaimed from HMRC on the eventual repayment of the loan, even if several years (and tax returns) after the loan was issued.

Like others, I try to steer clients away from taking director's loans - however there are a few circumstances where I have seen clients make this work for them, definitely one to run past your own accountant.

[northernladuk]

You are correct in that if the loan is below £10k then it would be below the de minimis limit to be treated as a benefit in kind. .

But it is still on 'HMRC's radar' as it will be recorded in your accounts under the Directors Loan Account?

[simes]

Not sure I understand as I said, 'if paid back within the year'.

Perhaps I should have specifically said 'year end'. For which, apologies.

This bit, "If the loan is repaid within 9 months of the year end then the S.455 reduces proportionally (at the 32.5% rate), likewise S.455 can be reclaimed from HMRC on the eventual repayment of the loan, even if several years (and tax returns) after the loan was issued." I will definitely have to run by the accountant...

[Alchemy Accountancy]

But it is still on 'HMRC's radar' as it will be recorded in your accounts under the Directors Loan Account?

Yes it will be recorded in the accounts as a director's loan, but from a benefit in kind perspective HMRC will not be interested in it unless it went over £10k at any point (not limited to the year end). The point about S.455, which is only applied at the year end, should be considered no matter what size the loan is.

[SandyD]

Like others, I try to steer clients away from taking director's loans - however there are a few circumstances where I have seen clients make this work for them, definitely one to run past your own accountant.

Thanks AA.. and exactly, there are some circumstances there such things are necessity and can work!!

NLUK ... I truly appreciate your attempts to help, but you have appointed yourself the police on 'No Loans' 'Loans are a Disaster' 'You are a moron if you take a loan' on this forum... My question was simple, I was not asking your permission on whether I can take a loan or not, taking a loan is perfectly legal as long as the director abides by all the legal and tax matters, yes it may not be the most tax efficient, but sometimes its a necessity. I do have a tax advisor, however, I like to ask some questions here prior to speaking with him, then I can make up my mind.

Others and I are entitled to ask questions even simple ones on this forum.. if we don't then what's the point of this forum??

[Maslins]

NLUK ... I truly appreciate your attempts to help, but you have appointed yourself the police on 'No Loans' 'Loans are a Disaster' 'You are a moron if you take a loan' on this forum.

The issue is over the years we see many people on the forum (and us accountants see many clients) take big loans thinking it's brilliant. We also see many people end up in a horrific mess a year or two later as the loans need repaying, they don't have the funds, so they face nasty consequences. Hence why many of the old hands on here warn against director loans.

[SandyD]

The issue is over the years we see many people on the forum (and us accountants see many clients) take big loans thinking it's brilliant. We also see many people end up in a horrific mess a year or two later as the loans need repaying, they don't have the funds, so they face nasty consequences. Hence why many of the old hands on here warn against director loans.

Yes I agree its not a tax efficient and perhaps its not one's first go to solution, however, as mentioned, its legal and one needs to do their due diligence... am just not sure why this forum jumps on everyone throat when anyone mentions director loan... company car... commercial loans .. those are not the 'Boogie Man'

As NLUK himself says over and over... we have proper legitimate Businesses, we need to operate like a business.. if we are too scared of touching any business finances without studying it properly and weighing the pros and cons.. why are we pretending that we are businesses?

[northernladuk]

Not sure I understand as I said, 'if paid back within the year'.

Perhaps I should have specifically said 'year end'. For which, apologies.

Which is still incorrect if it's less than 10k.

This bit, "If the loan is repaid within 9 months of the year end then the S.455 reduces proportionally (at the 32.5% rate), likewise S.455 can be reclaimed from HMRC on the eventual repayment of the loan, even if several years (and tax returns) after the loan was issued." I will definitely have to run by the accountant...

You don't really. It's very well documented in articles on CUK, the web and on the Gov websites.

[simes]

The issue is over the years we see many people on the forum (and us accountants see many clients) take big loans thinking it's brilliant. We also see many people end up in a horrific mess a year or two later as the loans need repaying, they don't have the funds, so they face nasty consequences. Hence why many of the old hands on here warn against director loans.

To be fair, the repayment of a loan requires exactly the same sort of planning as the paying of VAT and Taxes. If one can sort their lives out to cover taxes on a regular basis, one hopes the loan should not be too onerous a hardship...

Not having access to others' financial planning and inherent consequences, can I ask why you think these people find themselves fundless in respect to loans? Or, do they find themselves fundless for all sorts of payments including their tax responsibilities?