Director’s Loan and Bed and Breakfasting help

[concord]

Hello. In January 2019, the company loaned me less than £10k that I used to help pay for renovations before the tax year started. I paid the loan back in full at the start of December 2019.

This year I’m in a similar situation. We have a growing family and need to upgrade from a 3-door car. I want to get the car in March just before the new tax year starts.

I’ve read a bit about Director’s Loans and bed and breakfasting and my understanding is that if the loan is less than £15k, you need to wait 30 days after repaying before borrowing more money. Is it that simple? My accountant said wait about 4 months but I’m not sure where that came from.

Thanks.

[rambaugh]

Declare a dividend instead and avoid worrying about the pitfalls and headaches of B&B laws. Dividends at the basic rate are the most tax effective way to extract cash out of your ltd.

[northernladuk]

It does appear you are just using your LTD money to prop your personal life up which is the reason HMRC are clamping down on it. Whatever the minute details of timings the whole thing looks bad and warrants investigation. If HMRC believe your breaks exist for no other reason to meet the minium criteria they can still turn round and tax it as income.

DLs aren't there to push the boundaries IMO. Who knows what will happen if you get caught.

If a contractor can't afford a family car I'd argue there is a much bigger underlying problem here. Use DLs sparingly and look elsewhere for car finance IMO.

[TheCyclingProgrammer]

I’ve read a bit about Director’s Loans and bed and breakfasting and my understanding is that if the loan is less than £15k, you need to wait 30 days after repaying before borrowing more money. Is it that simple? My accountant said wait about 4 months but I’m not sure where that came from.

As far as the bed and breakfasting rule goes, yes:

1. Balances under £15k, any new loans taken within 30 days of repayment may be treated as a continuation of the previous loan and therefore may trigger an s455 tax charge. After 30 days its considered a new loan.

2. Balances £15k and over, any new loans taken *at any point* after repayment of the previous balance may be deemed as a continuation of a previous loan if in HMRC's opinion you had no intention to repay the previous balance and simply trying to avoid the s455 charge.

[concord]

Many thanks for your help. This page has good examples so I’m not sure why my accountant didn’t seem sure about the rules.