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Loan account

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11 December 2012
Issue: 4383 / Categories: Forum & Feedback
A company has paid more to its director/shareholder by way of dividends during a year than its post-tax profits. There is concern that a P11D has not been submitted and that this will result in substantial penalties

Our client operates his business through a limited company. The director who owns 75% of the business lives beyond his means and his director’s current account (DCA) is overdrawn at all times.

During 2011/12 the client took a basic salary of £7 020 and the rest of the money by way of dividends.

While preparing the annual accounts for the year ended 31 March 2012 we found out that the director took around £25 000 more in dividends than he was allowed to. The company’s after-tax profits were £100 000 but £125 000 was taken as dividends.

Our client is happy to pay tax under CTA 2010 s 455 to HMRC on the £25 000 overdrawn DCA but our concern is for the benefit in kind implications on the beneficial loan of £25 000.

The client is also happy to pay personal income...

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