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  1. #1

    Nervous Newbie


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    Default Entrepreneurs' relief

    Hello seasoned contractors,

    I have been running with a Limited Company since 2006. I have now taken up a permanent job and I am looking to close down my Limited Company. Year-end of my company is September.
    I had an outstanding Director's Loan which I have repaid in August 2019. My accountant has prepared my year-end accounts and it shows the settlement of the Director's loan. Now, I (my accountant) need to re-claim the Corporation Tax paid on this Director's loan in last few years.

    My questions are

    1. How many years in the past I can re-claim the CT paid on DL? (My accountant says 3 years max i.e. as far back as 2017). Is this correct?
    2. Is there a set period I need to wait for before I can start the Company liquidation process? (My accountant says I need to wait until June 2020 before I get my re-claimed CT and liquidate after that). Is this correct?

    Any advice on these would be highly appreciated.


    Thanks.

  2. #2

    My post count is Majestic

    northernladuk's Avatar
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    Speak to Chris Maslin. He runs MVL Online and is also an accountant so one stop shop for you. He posts a lot on here or get him at his company Maslins Accoutants.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  3. #3

    Contractor Among Contractors


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    Naaa, don't speak to me(!)

    I wish small company owners didn't take director loans! Always seems great in the short term, often causes problems further down the line. I didn't think there was a time limit in terms of how far back the director loan was taken and S.455 (the extra temporary tax on it).

    Your accountant is right that physically getting the refund won't happen for some time yet. Some liquidators will happily take on the case with the S.455 outstanding, and chase it up as part of their offering. Do be aware some of the more cheap and cheerful providers (such as MVL Online which NLUK mentions, a company I'm involved with) will insist on you collecting in any debts first. This just helps to make the liquidation itself as smooth as possible, hence keep costs and therefore fees low.

  4. #4

    Should post faster


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    Quote Originally Posted by Maslins View Post
    I didn't think there was a time limit in terms of how far back the director loan was taken and S.455 (the extra temporary tax on it).
    As Chris suggests there isn't a time limit other than you must reclaim the S445 within 4 years of repaying the loan.

    For the reclaim you need to wait 9 months and 1 day from the end of the financial year you repaid the loan in.

  5. #5

    Nervous Newbie


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    Thanks everyone. Can anyone recommend any good company who can help with MVL? I have looked at Clarke Bell and Frost Group so far. The latter is twice expensive than the former!

    Any advice please?

  6. #6

    My post count is Majestic

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    Quote Originally Posted by universal View Post
    Thanks everyone. Can anyone recommend any good company who can help with MVL? I have looked at Clarke Bell and Frost Group so far. The latter is twice expensive than the former!

    Any advice please?
    MVL Online. Run by Maslins who post on here regularly. Couple of well respected people on here can vouch for them and Chris Maslin is a top bloke.
    'CUK forum personality of 2011 - Winner - Yes really!!!!

  7. #7

    Contractor Among Contractors


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    Quote Originally Posted by universal View Post
    Thanks everyone. Can anyone recommend any good company who can help with MVL? I have looked at Clarke Bell and Frost Group so far. The latter is twice expensive than the former!
    It will depend on the final situation with regards to director loan/S.455. If those aren't resolved fully before you enter liquidation, expect a higher fee quote as the liquidator has to deal with them (I'm guessing with Frost Group you're looking at their "Silver" Package due largely to this, hence higher cost?).

    MVL Online have liquidated companies for a fair few CUK users. We've also got (at time of writing) 60 Google reviews, all 5*. However, we would need the director loan/S.455 to be dealt with by your accountant before we got involved. From your earlier post sounds like there will be a further wait until you can get the S.455 back, so if it was critical for you to proceed with the liquidation ASAP, MVL Online wouldn't be able to help.

  8. #8

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    Quote Originally Posted by Maslins View Post
    It will depend on the final situation with regards to director loan/S.455. If those aren't resolved fully before you enter liquidation, expect a higher fee quote as the liquidator has to deal with them (I'm guessing with Frost Group you're looking at their "Silver" Package due largely to this, hence higher cost?).

    MVL Online have liquidated companies for a fair few CUK users. We've also got (at time of writing) 60 Google reviews, all 5*. However, we would need the director loan/S.455 to be dealt with by your accountant before we got involved. From your earlier post sounds like there will be a further wait until you can get the S.455 back, so if it was critical for you to proceed with the liquidation ASAP, MVL Online wouldn't be able to help.
    Jus out of interest, would MVL Online be able to work with a situation where there was a directors loan but no s455 involved? So, a more recent loan that had been taken and that could be 'repaid' via a paper transaction during liquidation.

  9. #9

    Contractor Among Contractors


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    Quote Originally Posted by ChimpMaster View Post
    Jus out of interest, would MVL Online be able to work with a situation where there was a directors loan but no s455 involved? So, a more recent loan that had been taken and that could be 'repaid' via a paper transaction during liquidation.
    We used to, reluctantly, and for a £200 premium (ie £1,195+VAT+disbursements). However, there was an article in Taxation magazine circa 18 months ago that HMRC were starting to challenge these. Argument being that the client withdrawal of the funds pre liquidation was actually a dividend (not a loan), and hence the paper only distribution by the liquidator therefore be ignored. I don't know whether they were successful in this, indeed given speed cases go at it may still be rumbling on. However, we decided given that potentially negated the primary benefit of an offering like ours, and selfishly director loan cases were a PITA for us anyway, we decided to stop assisting with them.

  10. #10

    More time posting than coding


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    Quote Originally Posted by Maslins View Post
    We used to, reluctantly, and for a £200 premium (ie £1,195+VAT+disbursements). However, there was an article in Taxation magazine circa 18 months ago that HMRC were starting to challenge these. Argument being that the client withdrawal of the funds pre liquidation was actually a dividend (not a loan), and hence the paper only distribution by the liquidator therefore be ignored. I don't know whether they were successful in this, indeed given speed cases go at it may still be rumbling on. However, we decided given that potentially negated the primary benefit of an offering like ours, and selfishly director loan cases were a PITA for us anyway, we decided to stop assisting with them.
    Hi Chris

    I think HMRC lost a case on this but I can't find the details on it at the moment. Anyway, I believe they updated their guidance on the matter (quietly) which can be found at:

    CTM61559 - Company Taxation Manual - HMRC internal manual - GOV.UK

    Their example is key here (my bolding):

    Example

    A participator owed the company £1,425,000 by 30 May 2017. The company went into Members Voluntary Liquidation on 1 June 2017. The net assets, including the overdrawn loan account totalled £5,300,000.

    On 1 June 2017 the liquidators declared an interim distribution in the liquidation of £1,425,000 per £1 ordinary share, giving a total distribution at that date of £1,425,000. This was not paid out in cash to the shareholder but was credited to his loan account. It would be a capital distribution within TCGA92/S122. This is not a release of the loan, it is a repayment of the loan. There can be no charge under ITTOIA05/S415.

    Likewise any further distributions in the liquidation up to the total balance of the net assets will also be capital distributions.
    Should clear up the issue anyway that provided the liquidation is solvent and offset against an overdrawn loan account can be treated as a capital distribution. I do understand why you would shy away from cases involving a loan account though.

    Martin
    Contratax Ltd

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