Company/director loan

[justleads]

My Ltd Company has some profits. Within the 2021-2022 tax year the “manager loan account” was quite busy, as I paid for the company’s expenses with my personal card, and the company from time to time transferred cash to me. By 31/03/2022, I owed the company £30,000.

I repaid all of it by 31/12/2022.

(BTW, this 2022-2023 tax year I continued to pay many expenses by my personal card, and got cash from the company. This year, by 31/03/2023, I will take care to repay ALL the loan surplus IF there will be any, to avoid getting into a “Loan” again).

Issue 1: As I repaid £30,000 before the end of the 9th month (following the 2021-2022 tax year end), I only have to pay 2% interest to the company, report this loan (in the accounts and the CT600) as part of the company’s creditors, and that is all. No P11D, no company tax, no individual tax, nothing else.

Issue 2: Regarding the 2% interest. Should I calculate/pay this interest for the 2021-2022 tax year only, and include it in the “Interest receivable” for the 2021-2022 tax year? Or should I also add another calculation/pay for the 9 months of the 2022-2023 tax year as well? Or is the interest calculated for both as a single payment? Or what/when?

I am not sure about these two issues… Has anybody had/resolved this problem? Or knows the solution? Thanks for reading/responding…

 

[Lisa Thomas]

Doesn't the company have accountants? I can recommend a good one for you if that will help.

 

[Bobbo]

The first thing to understand is that the issues related interest are wholly separate from the CT600.

To avoid a benefit-in-kind for a beneficial loan made by the company to you as director, interest of at least 2% (the HMRC official rate) needs to have been paid. This is considered on a tax year basis, rather than the company financial year.

To avoid 'company tax' which i'm assuming refers to tax under Section 455 on loans to participators, the participator needs to have repaid the loan within 9 months of the end of the accounting period.

Given you refer to there being a loan position again in 2022/23, you may need to consider the 'bed and breakfasting' rules with relation to repayments of the loan and withdrawals. You will need to review withdrawals you have made from the company and repayments made to the company in the 9 months after your 21/22 financial year to determine if the loan has actually been cleared within 9 months.

One final point re "report this loan (in the accounts and the CT600) as part of the company’s creditors" - if you owe the company money this will be a debtor in the company accounts.

Do consider the services of an accountant.

 

[MyAccountantOnline]

My Ltd Company has some profits. Within the 2021-2022 tax year the “manager loan account” was quite busy, as I paid for the company’s expenses with my personal card, and the company from time to time transferred cash to me. By 31/03/2022, I owed the company £30,000.

I repaid all of it by 31/12/2022.

(BTW, this 2022-2023 tax year I continued to pay many expenses by my personal card, and got cash from the company. This year, by 31/03/2023, I will take care to repay ALL the loan surplus IF there will be any, to avoid getting into a “Loan” again).

Issue 1: As I repaid £30,000 before the end of the 9th month (following the 2021-2022 tax year end), I only have to pay 2% interest to the company, report this loan (in the accounts and the CT600) as part of the company’s creditors, and that is all. No P11D, no company tax, no individual tax, nothing else.

Issue 2: Regarding the 2% interest. Should I calculate/pay this interest for the 2021-2022 tax year only, and include it in the “Interest receivable” for the 2021-2022 tax year? Or should I also add another calculation/pay for the 9 months of the 2022-2023 tax year as well? Or is the interest calculated for both as a single payment? Or what/when?

I am not sure about these two issues… Has anybody had/resolved this problem? Or knows the solution? Thanks for reading/responding…

My immediate thought on reading your post is that although you may feel you've repaid your directors loan the fact that you continued to take cash from the company may actually mean the loan wasn't repaid for tax purposes.

Also have you read the HMRC guidance here?

https://www.gov.uk/directors-loans/you-owe-your-company-money

 

[AndreasC]

You should speak to an accountant as the way you are taking loans from the company may be causing you issues here

 

[justleads]

Doesn't the company have accountants? I can recommend a good one for you if that will help.

Yes indeed. We have a “standard” service, but perhaps an hourly paid advice from a proper tax expert would be a good idea, as I have quite a few issues raised from time to time….

 

[justleads]

The first thing to understand is that the issues related interest are wholly separate from the CT600.

I understand. I was worried that somebody claimed that I do have to report it on P11D (for the year when I originally took the loan). I am sure I don't have to. Right?

To avoid a benefit-in-kind for a beneficial loan made by the company to you as director, interest of at least 2% (the HMRC official rate) needs to have been paid. This is considered on a tax year basis, rather than the company financial year.

So for the "original tax year" 2021-2022, I will add 2% for the company as "Interest Receivable", and will pay now (9 month later!), or alternatively deduct it from the "manager loan account" for the year 2022-2023, or what?

To avoid 'company tax' which i'm assuming refers to tax under Section 455 on loans to participators, the participator needs to have repaid the loan within 9 months of the end of the accounting period.

All repaid, anything received from the company was "interim dividend" or to cover my payments for the company expenses... NOT another loan.

Given you refer to there being a loan position again in 2022/23, you may need to consider the 'bed and breakfasting' rules with relation to repayments of the loan and withdrawals. You will need to review withdrawals you have made from the company and repayments made to the company in the 9 months after your 21/22 financial year to determine if the loan has actually been cleared within 9 months.

Yes cleared, as I mentioned above: by 9 months, ALL repaid.

One final point re "report this loan (in the accounts and the CT600) as part of the company’s creditors" - if you owe the company money this will be a debtor in the company accounts.

I obviously had in mind what you said, but being unprofessional, called it wrongly

Do consider the services of an accountant.

As I answered above to Lisa Thomas, yes, I do look for an hourly-rate-expert. If this is possible, hint-hint
And yes, thank you for the above detailed and focused response

 

[justleads]

My immediate thought on reading your post is that although you may feel you've repaid your directors loan the fact that you continued to take cash from the company may actually mean the loan wasn't repaid for tax purposes.

All repaid within 9 months, and anything else received from the company within these 9 months was or "interim dividend" or to cover my payments for the company expenses... NOT another loan.

Also have you read the HMRC guidance here?

Yes, I did read the guidance, but not sure if I understood all properly (therefore an hourly-rate-expert could be appropriate, meethink, for various issues like that)
E.g., still not clear about the interest 2%. I understood that in the accounts of the "original tax year" 2021-2022, I will add 2% for the company as "Interest Receivable", and will actually pay now (9 month later!), or alternatively deduct it from the "manager loan account" for the year 2022-2023, or what?

 

[justleads]

You should speak to an accountant as the way you are taking loans from the company may be causing you issues here

Agreed, as I mentioned in my responses above

 

[Lisa Thomas]

Yes indeed. We have a “standard” service, but perhaps an hourly paid advice from a proper tax expert would be a good idea, as I have quite a few issues raised from time to time….

Suggest you speak to them as they will know more about your circumstances than strangers on an internet forum and are best placed to advise you.