Showing posts with label ct600. Show all posts
Showing posts with label ct600. Show all posts

Friday, November 1, 2013

Director's Loan Accounts: beware if overdrawn

A director's loan is a loan made by a company to a director (or related party). HMRC has been trying to prevent directors to borrow money from their business because this is money they would have to draw either as salary or dividends otherwise and pay tax and NI on those amounts.

In 2010 HMRC published the Corporation Tax Act 2010 and section 455 put in place some rules to prevent the practice: if a close company makes a loan to a relevant person who is a participator in the company or an associate of such a participator and if this loan is outstanding at year end, then 25% of that loan will have to be paid under Corporation Tax to HMRC -- unless the loan is reimbursed before tax is due (usually 9 months after the year end). Moreover, if at any point in time, the loan balance is above £5,000 the whole loan becomes a benefit in kind for the director.

Tuesday, December 27, 2011

Annual Party Tax Considerations

When it comes to dining either employees or clients, you have to be aware of the tax implications. If you dine your employees, it is considered an allowable business expense for the company but a taxable benefit for the employee. Unless the company has put a PAYE Settlement Agreement (PSA) in place those benefits have to be reported on the employee's P11D and the employee will end up paying taxes on those. When you dine clients however, this is considered entertainment and it is therefore not an allowable business expense from a corporation tax standpoint (effectively increasing the tax rate for the company).