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TonyTax
TonyTax, Tax Consultant
Category: Tax
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Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi, I was due to pay interest on my directors loan account

Resolved Question:

Hi, I was due to pay interest on my directors loan account balance at 25% as part of last years tax which I did not pay. Does that mean I incur another years worth of interest this year as it was not paid nor was the loan paid off? Thanks

Submitted: 2 years ago.
Category: Tax
Expert:  TonyTax replied 2 years ago.

Hi.

There is only one tax Section 455 CTA 2010 charge of 25% but if the overdrawn balance has increased compared to the previous year, then there may be a 25% tax charge on the increase. HMRC will charge interest on any Section 455 tax paid late.

Take a look here for information on directors loan accounts.

I hope this helps but let me know if you have any further questions.

Customer: replied 2 years ago.

No the overdrawn balance is still the same - so its a one off payment of interest for the year the loan was incurred correct? Do you know approximately the rate of interest charged on the late payment?

Thanks

Expert:  TonyTax replied 2 years ago.
The section 455 charge is a one off. That's 25% of the outstanding balance. Interest is charged at 3% per annum from the due date for payment which would have been nine months and one day after the end of the relevant accounting period.
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15753
Experience: Inc Tax, CGT, Corp Tax, IHT, VAT.
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