How to deal with a directors loan repaid after 4 years

[digimars]

I had a directors loan (I'm the director) taken from my ltd company pre covid, but repaid the loan after 4 years from taking it. Now on the HMRC website it states:

You must claim within 4 years (or 6 years if the loan was repaid on or before 31 March 2010).

So I understand I cannot reclaim the s455 charge anymore, but as the loan has been repaid, and is no longer on the debtors side of balance sheet, can you claim the s455 charge as business expense? Or where does it go on the P&L?

Many thanks

 

[MyAccountantOnline]

I had a directors loan (I'm the director) taken from my ltd company pre covid, but repaid the loan after 4 years from taking it. Now on the HMRC website it states:

You must claim within 4 years (or 6 years if the loan was repaid on or before 31 March 2010).

So I understand I cannot reclaim the s455 charge anymore, but as the loan has been repaid, and is no longer on the debtors side of balance sheet, can you claim the s455 charge as business expense? Or where does it go on the P&L?

Many thanks

What date(s) did you repay the loan?

 

[Ziggy2024]

What date(s) did you repay the loan?

As noted you may still be able to reclaim depending on when you repaid the loan. The time limit starts from this date, not the time between the loan and repayment.

The tax is not an expense, it will just go in the tax section of your p&l if you are unable to reclaim.

 

[digimars]

What date(s) did you repay the loan?

Is it the date of the exact day I repaid (payroll submission - I didn't withdraw the funds and repaid the loan) the loan or the date that my end of the year accounts were submitted and the loan recorded as repaid?

Either way it was in 2024.

Cheers

 

[digimars]

As noted you may still be able to reclaim depending on when you repaid the loan. The time limit starts from this date, not the time between the loan and repayment.

The tax is not an expense, it will just go in the tax section of your p&l if you are unable to reclaim.

Really? That's great. I repaid the loan in 2024 but it was taken pre covid so more than 4 years age.

Is the repayment date the exact date you repaid or the date of your accounts?

Cheers

 

[MyAccountantOnline]

Really? That's great. I repaid the loan in 2024 but it was taken pre covid so more than 4 years age.

Is the repayment date the exact date you repaid or the date of your accounts?

Cheers

Yes that's fine - you use the actual date it was repaid so your payroll date in this case.

It's actually very quick and easy to make the claim online - done a few recently and the tax has been refunded within 2 weeks!!

 

[digimars]

Yes that's fine - you use the actual date it was repaid so your payroll date in this case.

It's actually very quick and easy to make the claim online - done a few recently and the tax has been refunded within 2 weeks!!

Now in the online form there's the following:

Accounting period in which loan was made​

But from my accounts, I can see my accountant classified the loan as dividends at first, I guess anticipating I would pay back the full amount or pay tax on dividends, and then the next year basically after 9 months that the loan was not repaid (which was basically the amount above the dividends tax free allowance), she reclassified the dividends above the tax free allowance as loan, and that is the number I have with HMRC.

So my question is, what is the accounting period in which the loan was taken?

Many thanks

 

[digimars]

Now in the online form there's the following:

Accounting period in which loan was made​

But from my accounts, I can see my accountant classified the loan as dividends at first, I guess anticipating I would pay back the full amount or pay tax on dividends, and then the next year basically after 9 months that the loan was not repaid (which was basically the amount above the dividends tax free allowance), she reclassified the dividends above the tax free allowance as loan, and that is the number I have with HMRC.

So my question is, what is the accounting period in which the loan was taken?

Many thanks

These are my DLA balances from my accountant:

Year one:

Balance brought forward 29.00
Use of home as office 312.00
Repaid (personal tax) -127.00
Closing balance 214.00

Year two:

Balance brought forward 214.00
Use of home as office 60.00
Unpaid wages 30.00
Cash withdrawn -143.00
Dividends reclassified -3,100.00
Closing balance -2,939.00

And 2,939.00 is what HMRC charged me s455 on.

So which year was the loan made?

Many thanks

 

[MyAccountantOnline]

These are my DLA balances from my accountant:

Year one:

Balance brought forward 29.00
Use of home as office 312.00
Repaid (personal tax) -127.00
Closing balance 214.00

Year two:

Balance brought forward 214.00
Use of home as office 60.00
Unpaid wages 30.00
Cash withdrawn -143.00
Dividends reclassified -3,100.00
Closing balance -2,939.00

And 2,939.00 is what HMRC charged me s455 on.

So which year was the loan made?

Many thanks

The loan became overdrawn with the payment to you noted as 'dividends reclassified' so you use that date (in year 2).

 

[Lisa Thomas]

Is there a reason you haven't asked your accountants to answer your queries?

 

[digimars]

Is there a reason you haven't asked your accountants to answer your queries?

Yes she got rich in the accounting business and retired to Cornwall

My new one is good with PnL but not too good with loans unfortunately.

 

[digimars]

The loan became overdrawn with the payment to you noted as 'dividends reclassified' so you use that date (in year 2).

Thanks for the feedback indeed.

So I take it in general, the date a loan is made is the one you get charged s455? Because I made the payment to myself, I mean the transfer from the business account to personal in year one, it was just classified as dividends.

In other instances, as I understand it, I would take a loan, recorded it in DLA in year one, and if I did not pay it back in 9 months, the outstanding balance would be charged s455 in the CT600 in year two in my accounts.

Many thanks.

 

[MyAccountantOnline]

Yes she got rich in the accounting business and retired to Cornwall

My new one is good with PnL but not too good with loans unfortunately.

I dont mean any disrespect but directors loans are basic fundamental aspects of company accounting and tax. A qualified and experienced accountant should be able to deal with this - you shouldn't have to seek advice from an online forum.

 

[MyAccountantOnline]

...as I understand it, I would take a loan, recorded it in DLA in year one, and if I did not pay it back in 9 months, the outstanding balance would be charged s455 in the CT600 in year two in my accounts.

You look at the company accounting year so if for example your company year end is 31 March and you took a loan during the year to 31 March 2025 it'll be reported on the Corporation tax return to 31 March 2025 and your company must pay tax on the loan balance if you dont repay the loan in full by 1 January 2026.

 

[digimars]

I dont mean any disrespect but directors loans are basic fundamental aspects of company accounting and tax. A qualified and experienced accountant should be able to deal with this - you shouldn't have to seek advice from an online forum.

Agreed. But to keep the cost down, as my company is not making any money at the moment, I had to hire oversees...

 

[Paul Kelly ICHYB]

My new one is good with PnL but not too good with loans unfortunately.

Time to find another new accountant!

 

[digimars]

You look at the company accounting year so if for example your company year end is 31 March and you took a loan during the year to 31 March 2025 it'll be reported on the Corporation tax return to 31 March 2025 and your company must pay tax on the loan balance if you dont repay the loan in full by 1 January 2026.

I do understand the 9 months period, but which accounting period was the loan made?

Using your example.

Year End 31 March 2025
- I paid myself interim dividends say 3,100 spread throughout the year (e.g. Jan and Feb 2025)
- I cannot see where this would go onto CT600 even if recorded as negative DLA balance instead of interim dividends

Year End 31 March 2026
- 3,100 was reclassified as loan and because it was not repaid after 9 months since the year end 31 March 2025, s455 charge was applied
- the s455 tax on this loan is on CT600 as [480] Tax payable on loans and arrangements to participators

Now in the form to reclaim the charge they want:
- Accounting period in which loan was made
- Date the loan was made

In the example above, which is the period and which is the date the loan was made?

Many many thanks.

Cheers

 

[Ziggy2024]

Who "reclassified" the dividends and does that track back to your personal tax returns? You need to check that as well as sorting out the ct600.

The period is 31st March 2026, I would say the date of the loan would be 1st April 2025 due to the reclassification.

Note for future that if a dividend is correctly declared then you do not (actually can not) change this. From your posts I'm unsure why your accountant would do what you say they have.

 

[UK Contractor Accountant]

As Post #18 above if it was properly declared by the Director as interim dividends and recorded as such in the accounting records then your Accountant has no business reclassifying it as a Director Loan.

 

[GLAbusiness]

All sorts of red flags here:

Was it a legal dividend - Given the business is strapped for cash I suspect not enough distributable profit
Was tax paid on the dividend, was it on the tax return
OP is trying to sort it out with an incompetent accountant

If OP does not get a qualified accountant the the mess will just get messier. This is not a DIY problem

 

[digimars]

All sorts of red flags here:

Was it a legal dividend - Given the business is strapped for cash I suspect not enough distributable profit
Was tax paid on the dividend, was it on the tax return
OP is trying to sort it out with an incompetent accountant

If OP does not get a qualified accountant the the mess will just get messier. This is not a DIY problem

No red flags at all. She was a pro. Her work was always on point.
All I need to work out, is the dates so that I can reclaim the tax.

I think there are two possible scenarios. One is with and the other without reclassifying the dividends.
In my case she reclassified legal dividends. Probably because I wasn't sure if want to keep the dividends (and pay tax on dividends) or repay as loan. Here is what uncle google has to say.

Why accountants often reclassify​

• If the dividend was not formally declared or exceeded distributable profits, keeping it as a dividend could be illegal.
• By reclassifying to a director’s loan:
  
  • You avoid personal dividend tax.
  • Company pays temporary s455, which is reclaimable.
  • Accounts are legally correct.

Effectively, the reclassification is a timing/legal fix, not a way to avoid paying tax forever.

So in my case, scenario 1 (dividends reclassified in year 2), the accounting period in which the loan was made and the period that the s455 charge goes into CT600 are the same (year 2), as when she reclassified in year 2, the loan was already past the 9 moths threshold.

Now in scenario 2 (no dividends involved), the accounting period in which the loan was made is year 1, and and s455 goes into CT600 after 9 months so that end of year 2.

So the difference is just in case of reclassifying the dividends as the accounting period in which the loan was made is year 2. Otherwise it would be year 1. In both scenarios the s455 goes into CT600 in year 2 since the funds were withdrawn.

Practical example​

• Year 1: £12,000 withdrawn over 12 months.
• Initially booked as interim dividends >> would have been £12,000 dividend income.
• Year 2: Accountant reverses it >> treated as DLA.
• s455 applied on £12,000 (33.75% temporary tax = £4,050).
• When you repay the £12,000 loan, company reclaims £4,050.
• You never pay personal dividend tax.
• ACCOUNTING PERIOD IN WHICH LOAN WAS MADE: YEAR 2

I will mark year 2 when I reclaim the s455, and if it's actually year 1 (as in case of regular loan without reclassification), then Iwill have to do the claim again I guess.

Many thanks for your help.

Cheers

 

[GLAbusiness]

I am not an accountant but I think there are a few things to think about

The dividend tax is a personal tax so operate on the tax year. So, if your company year is not aligned the £12k could be spread over 2 tax years.

"you never pay dividend tax" is true, but equally it is never your own money

It is not clear to me if you are reclaiming personal tax claimed or if the company is making a claim



As an aside I would never outsource my accounting overseas. There are a number of accountants on here who I am sure would do a better job for you

 

[digimars]

I am not an accountant but I think there are a few things to think about

The dividend tax is a personal tax so operate on the tax year. So, if your company year is not aligned the £12k could be spread over 2 tax years.

"you never pay dividend tax" is true, but equally it is never your own money

It is not clear to me if you are reclaiming personal tax claimed or if the company is making a claim



As an aside I would never outsource my accounting overseas. There are a number of accountants on here who I am sure would do a better job for you

My company is doing this:

Reclaim tax paid by close companies on loans to participators​

Oversees accountant is 160 quid per set of accounts, UK is 500. Simple as that.

Cheers

 

[GLAbusiness]

You are comparing costs. You should compare cost/benefits


Remember: good, quick, cheap - you can only get 2 out of 3, never all 3.

 

[Lisa Thomas]

My company is doing this:

Reclaim tax paid by close companies on loans to participators​

Oversees accountant is 160 quid per set of accounts, UK is 500. Simple as that.

Cheers

But now you need extra advice outside the scope of simply producing accounts. Best to pay for it properly by someone who is qualified ato give advice relating to your exact circumstances as mistakes can be costly.

 

[digimars]

But now you need extra advice outside the scope of simply producing accounts. Best to pay for it properly by someone who is qualified ato give advice relating to your exact circumstances as mistakes can be costly.

I agree.

But have been quoted unreasonable amounts and on top of that, I don't need anybody to go through my bank statements. I have all the numbers in my spreadsheets. I don't need anybody to act as my agent. I basically need someone to help me out as an internal accountant and submit the accounts under my company's name.

Possible?

Cheers

 

[GLAbusiness]

If you are referring to the £500 quote you mentioned then I don't think that is unreasonable.. It is your expectations which seem unreasonable to me.

Question for the accountants on here: How may clients have you seen with spreadsheets which contain errors

 

[MyAccountantOnline]

If you are referring to the £500 quote you mentioned then I don't think that is unreasonable.. It is your expectations which seem unreasonable to me.

Question for the accountants on here: How may clients have you seen with spreadsheets which contain errors

I've been an accountant in practice for over 30 years and truly I do not believe I have ever seen a spreadsheet provided by a client which has been entirely error free. I use spreadsheets a lot but, in my opinion, it's not the right tool in 2026 to maintain accounting records.

 

[MyAccountantOnline]

I agree.

But have been quoted unreasonable amounts and on top of that, I don't need anybody to go through my bank statements. I have all the numbers in my spreadsheets. I don't need anybody to act as my agent. I basically need someone to help me out as an internal accountant and submit the accounts under my company's name.

Possible?

Cheers

I do understand and appreciate the need to keep costs down but an accountant who prepares accounts solely from a spreadsheet isn't doing the job properly.

Preparing company accounts is way more than just “typing the numbers into accounts from a spreadsheet.” A UK accountant is usually taking on professional responsibility for the final accounts, making sure they comply with Companies House and HMRC requirements, checking that the figures are treated correctly and that you are claiming all tax relief possible as well as carrying the liability if something is wrong. That professional oversight is part of what you’re paying for.