Repaying a previous year's Director's Loan after further Director's Loan taken
If a Director's Loan of £5000 was taken in 2012/13 accounting year and then further director's loans were taken in the 2013/14 accounting year totalling £25,000, to avoid paying Corporation Tax on the loan, I understand from here that the DLA must be repaid "in full within 9 months".
I asked my accountant about this and she told me that only the £5000 needs to be paid off by way of an unpaid dividend (assuming there's enough profit). But that's only paying off that particular director's loan off in full; it's not paying off the director's loan account in full; so, I'd like to know the forum's opinion on this. It concerns me because it seems too easy for someone to just take further director's loans, therefore not eating into the company's profit, and then just pay off a previous loan with said profit in the aforementioned manner. Or, how about this: one takes a loan for £50,000 in one year; the next year, they take another loan for £50,000 (now the DLA is £100,000), wait 31 days then pay £50,000 back into the DLA and say it's to pay off the previous year's loan. They could do this every year and never pay tax on £50k (only BIK interest).
It doesn't seem right. My opinion is that the DLA must be paid in full within 9 months of the end of an accounting period to avoid tax on director's loan taken in said accounting period regardless of further loans that are taken out, and that the 30-day rule in the aforementioned link only applies when the DLA has been fully paid off - otherwise, tax remains due regardless.
What are people's thoughts?
Thanks
I asked my accountant about this and she told me that only the £5000 needs to be paid off by way of an unpaid dividend (assuming there's enough profit). But that's only paying off that particular director's loan off in full; it's not paying off the director's loan account in full; so, I'd like to know the forum's opinion on this. It concerns me because it seems too easy for someone to just take further director's loans, therefore not eating into the company's profit, and then just pay off a previous loan with said profit in the aforementioned manner. Or, how about this: one takes a loan for £50,000 in one year; the next year, they take another loan for £50,000 (now the DLA is £100,000), wait 31 days then pay £50,000 back into the DLA and say it's to pay off the previous year's loan. They could do this every year and never pay tax on £50k (only BIK interest).
It doesn't seem right. My opinion is that the DLA must be paid in full within 9 months of the end of an accounting period to avoid tax on director's loan taken in said accounting period regardless of further loans that are taken out, and that the 30-day rule in the aforementioned link only applies when the DLA has been fully paid off - otherwise, tax remains due regardless.
What are people's thoughts?
Thanks
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