Mark McLaughlin highlights a case where an overdrawn director’s loan account balance resulted in an unexpected tax charge for a director shareholder.
Director’s loan accounts (DLAs) are a common feature in the financial statements of family and owner-managed companies in particular.
A ‘close’ (i.e., broadly a closely-controlled) company is charged tax (at 33.75%) in certain circumstances where the company makes a loan to a ‘participator’ (e.g., shareholder), commonly in respect of the overdrawn loan account of a director shareholder (CTA 2010, s 455). Where this tax charge arises, relief is generally available to the extent that the loan is subsequently repaid, released or written off.
Now you see it…
However, if the loan is released or written off,
