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TonyTax
TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15946
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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I am the Managing Director of a small. wholly owned, limited

Customer Question

I am the Managing Director of a small. wholly owned, limited company and wish to take a Directors Loan of £60,000 from a company savings account, upon which Corporation tax has been paid. I expect to take the loan in January, 2016 and, hopefully, repay it in full before the tax year is out. This may not be the case and the loan could cascade into the next tax year, even as late as June.
In the first case, if repaid in March, 2016, what would be my tax liability?
In the second case, if repaid in June, 2016, what would be my tax liability?
Submitted: 1 year ago.
Category: Tax
Expert:  TonyTax replied 1 year ago.
Hi. Can you tell me what the company's accounting date is please.
Customer: replied 1 year ago.
No. I assume that it is the same as any other small company as there is nothing extraordinary about mine
Customer: replied 1 year ago.
(Posted by JustAnswer at customer's request) Hello. I would like to request the following Expert Service(s) from you: Live Phone Call. Let me know if you need more information, or send me the service offer(s) so we can proceed.
Customer: replied 1 year ago.
I started the company in December of a year, perhaps that makes my accounting year December
Expert:  TonyTax replied 1 year ago.
Thanks. Give me a few minutes to post my answer. Then you can decide whether a call is required.
Expert:  TonyTax replied 1 year ago.
Hi again. According to the website here, the official rate of interest was due to change from 3.25% to 3.00% with effect from 6 April 2015. If you have an interest free loan for 96 days from 1 January 2016 to 5 April 2016, the taxable benefit will be £472 (£60,000 @ 3% / 366 x 96). You will pay tax on the benefit at 20%, 40% or 45% or a combination of two of those rates. The company will have a Class 1A NIC liability of £65.14 (£472 @ 13.8%). If you have an interest free loan for 182 days from 1 January 2016 to 30 June 2016, the taxable benefit will be £895 (£60,000 @ 3% / 366 x 182). You will pay tax on the benefit at 20%, 40% or 45% or a combination of two of those rates. The company will have a Class 1A NIC liability of £123.51. (£895 @ 13.8%). I asked about the company's accounting date. This is because if the loan is not paid back within 9 months and one day of end of the the accounting period during which the loan was taken out, there will be a Section 455 tax charge on the company equal to 25% of the outstanding balance. This tax can be claimed back as and when the loan is repaid by writing to HMRC nine months after the end of the accounting period during which it was repaid. Take a look here for more information. I hope this helps but let me know if you have any further questions.
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Customer: replied 1 year ago.
No, that's brilliant, thank's
Expert:  TonyTax replied 1 year ago.
Thanks for accepting my answer. I always like customers to look at my answers before they decide whether they need a phone call though I'm always happy to make a call.