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bigduckontax
bigduckontax, Accountant
Category: Tax
Satisfied Customers: 4203
Experience:  FCCA FCMA CGMA ACIS
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If funds (£3,000) are transferred by cheque from a limited

Customer Question

If funds (£3,000) are transferred by cheque from a limited company’s bank account in June 2009 into a private school’s bank account for the sole purpose of paying for a required deposit for a child who will be at the school for several years, can the director of that company claim that the £3,000 has only been taxed at 20% and need to be repatriated back now into the companies bank account to avoid paying tax as a dividend or income. If that is not legal/possible then surly the £3,000 had to declared as taxable income/dividend for the tax year 2009/10 is that right .
Submitted: 2 years ago.
Category: Tax
Expert:  bigduckontax replied 2 years ago.
Hello, I'm Keith and happy to help you with your question.
To use a well known Scottish idiom, and I live North of the Border, you are getting yourself into a fankel or a right scutter!
The transfer of 3K should have been credited to Debtors in the company's bank account. On repayment that Debtor's ledger entry would have been cleared. Such a transaction would be outwith the Profit and Loss account and outside the scope of the Corporation Tax computation.
However, HMRC might consider that the 3K is, in reality, a loan by the company to a Director. If that is the case the consequences can be horrendous and most experts on this site would caution you to clear such a debt before the company's financial year end and certainly within 9 months thereof. Fortunately this sum was below the key limit [5K in 13/14, 10K in 14/15] so you avoid the real horrors. You can read about loans by companies to directors here:
https://www.gov.uk/directors-loans/you-owe-your-company-money
You may have to come back to me on this matter.
I do hope I have helped shed some light on the position.