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Directors’ loans: It’s a write-off!

Shared from Tax Insider: Directors’ loans: It’s a write-off!
By Jennifer Adams, May 2022

Jennifer Adams considers the tax implications should a director be unable to repay the balance on their overdrawn directors loan account and the loan has to be written off. 

Many small and medium-sized companies struggled through the pandemic, with some directors or shareholders finding that they have overdrawn loan accounts which they are unable to repay, even after taking salary and dividends into account.  

An individual who is a full-time working director with an interest of more than 5% in the company’s share capital is required to repay this amount before the company’s corporation tax is due, nine months after the year end; otherwise, the company is liable to an additional tax charge of 33.75% of the amount (for 2022/23). The director may also be required to pay additional tax and National Insurance contributions (NICs) under the benefit-in-kind rules (e.g., where the balance owing on the loan exceeds £10

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