07 Aug 2018
HMRC defines a director's loan as money taken from your company (by you or other close family members) that isn’t:
An overdrawn director's loan account is created when a director effectively 'borrows' company money. A record of these loans must be kept in a director's loan account (DLA). Small business owners need to be mindful that withdrawing funds from their company can have unwanted tax consequences for both the company and the director. The tax rules are further complicated if the value of the loan exceeds £10,000.
Where certain DLAs are not paid off within nine months and one day of the company's year-end there is an additional Corporation Tax (CT) bill of 32.5% of the outstanding amount (prior to April 2016 this rate was 25%). In most cases this is not a permanent loss of revenue for the company as a claim can be made to have this CT refunded (but not interest) when the loan is paid back to the company. It is important to ensure that the claim to have the CT refunded is made within 4 years after the end of the year in which the participator's loan was repaid.
The use of DLAs as a means of extracting money from your company needs to be carefully considered with proper analysis of the tax impact for both the company and director. Please call if you need more information on this topic.
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Chris works with a diverse profile of owner managed businesses to assist them to grow and retain wealth. Although Chris works with clients from a wide range of sectors, he has particular expertise in property, catering, consultancy and professional services.
Managing Director ACMA
Alex has worked for Grenfell James since 2002 and became a director in 2013. Overseeing our internal operations, he manages the flow of work and ensures we hit our strict deadlines. Alex also manages a portfolio of clients, with expertise in manufacturing and service businesses.
Operational Director MAAT
David has worked for Grenfell James since 2006. He heads up our tax team and is highly experienced with expertise in different industries and sectors.
Tax Director ACCA
Hannah qualified in 2016, having worked for the company since 2009. She acts as a client manager for a range of businesses, with expert knowledge of the equestrian and rural sector. Hannah also manages our payroll team.
Client Manager ACCA
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