I am looking to close my company, which has a significant amount outstanding on my director’s loan account, around £75,000). I am the director and sole shareholder of the company. The company’s section 455 tax charge has been paid on the outstanding amount to HMRC. The company currently has assets in the form of cash to the order of £11,000. Other than paying the loan back to the company, what are the (most preferred) options to settle this amount? It goes without saying that a liquidator and HMRC are going to have to be okay with it.
Arthur Weller replies:
It seems to me that liquidating the company effectively means the company writing off the loan. The company could then reclaim from HMRC the section 455 tax that was originally paid. But you, the shareholder, will then be deemed to have received a dividend equal to the amount written off. However, the 7.5% dividend tax is treated as having been paid. So it will only impact the shareholder to the extent that this ‘dividend’ falls above the higher rate threshold. A practical point is if the company is liquidated, by the time HMRC get round to attempting to repay the section 455 tax, the company may no longer exist. So it would make sense to delay finalising the liquidation.