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A director’s loan account is a mechanism of keeping track of the transactions between the director and his or her personal or family company. In this guide, Sarah Bradford explains some of the planning opportunities and pitfalls associated with the use of directors’ loan accounts.
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1. Nature Of A Director’s Loan Account
2. Overdrawn Director’s Loan Account
2.1 Overdrawn Account Repaid Within Nine Months Of End Of AP2.2 Overdrawn Account Still Outstanding Nine Months And One Day After End Of AP2.3 Overdrawn During The Year
3. What Is A Close Company
3.1 Who Is A Participator?3.2 Why Does It Matter?
4. Meaning Of `Loan’
4.1 What Is Not A Loan?
4.1.1 Unpaid Share Capital4.1.2 Supply Of Goods And Services4.1.3 Small Loans4.1.4 Loans In The Ordinary Course Of Business4.1.5 Amounts On Which Income Tax Is Paid4.1.6 Loans To A Charitable Trust
4.2 Indirect Loans
5. Section 455 Charge
5.1 Nature Of The Section 455 Tax Charge5.2 Amount Of The Section 455 Tax5.3 Payment Of The Tax5.4 A Temporary Tax5.5 Timing The Loan Repayment5.6 Claiming A Section 455 Tax Repayment5.7 Giving Effect To A Section 455 Tax Repayment
6. Clearing An Overdrawn Director’s Loan Account
6.1 Introducing Funds6.2 Declaring A Dividend6.3 Paying A Salary6.4 Paying A Bonus6.5 Writing Off The Loan
7. Benefits-In-Kind Charge
7.1 No Charge On Loans Less Than £10,0007.2 Other Exemptions7.3 Tax Charge On Cheap Loans7.4 Class 1A Charge7.5 Reporting The Benefit
8. Tax Planning Opportunities
8.1 Enjoy An Interest-Free Loan Tax-Free For Up To 21 Months8.2 A Cheap Source Of Finance
8.3 Clear The Loan To Avoid A Section 455 Charge8.4 Choose The Lowest Tax Rate8.5 Consider Cashflow8.6 Choose Which Loan Is Repaid
9.1 The Bed And Breakfast Trap9.2 The 30-Day Rule9.3 The Intentions And Arrangements Rule9.4 Arrangements Conferring A Benefit On A Participator
10. Account In Credit