Director’s loan account

Produced by a Tolley Employment Tax expert

Employment Tax

Guidance

Proprietors often take loans from their companies. Since 1 October 2007, following Companies Act 2006, private companies are permitted to make loans to their directors provided that shareholder approval is obtained.

The main tax implications of loans from companies to their directors are the possibility of a taxable employment benefit for the director and a tax liability at the dividend upper rate for the company if the loan is unpaid nine months after the period end.

See also Simon’s Taxes E8.290, B9.133 and B9.129. HMRC guidance on loans to participators is at CTM36210.

Tax implications for the company

A corporation tax charge arises if the employer is a close company and it makes a loan to a participator. For definitions and the tax treatment, see the Loans to participators guidance note.

Tax implications for the director

If a loan is provided by a third party, rather than the employer, it is worth considering whether the disguised remuneration provisions in ITEPA 2003, ss 554A–554Z21 (Pt 7A) apply, as those rules have priority over most of the other rules

Continue reading

To read the full Guidance note, register for a free trial of Tolley+™

TAKE A FREE TRIAL

Popular Articles

Owner-Managed Businesses

Wholly and exclusively

Wholly and exclusivelyFor both income tax and corporation tax purposes, one of the fundamental conditions that must be satisfied for an item of expenditure to be deductible, is that it must incurred ‘wholly and exclusively’ for the purposes of the trade, profession or vocation. References to CTA

14 Jul 2020 14:00 | Produced by Tolley Read more

Value Added Tax

Exporting goods ― proof of export

Exporting goods ― proof of exportIn addition to the requirements laid down in the Exporting goods ― overview guidance note, businesses intending to zero-rate exported goods must hold satisfactory evidence that the goods have been delivered to a destination outside of the UK. If satisfactory evidence

15 Dec 2020 14:02 | Produced by Tolley Read more

Owner-Managed Businesses

Furnished holiday lets

Furnished holiday letsThis guidance note sets out the qualifying conditions for a property let to be treated as a furnished holiday let (FHL) for tax purposes and the subsequent tax implications.Whether or not a property qualifies as an FHL can make an important difference to the taxation

14 Jul 2020 11:46 | Produced by Tolley Read more

��Ƶ