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TonyTax, Tax Consultant
Category: Tax
Satisfied Customers: 15977
Experience:  Inc Tax, CGT, Corp Tax, IHT, VAT.
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Hi I wanted to check how we should report an overdrawn loan

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I wanted to check how we should report an overdrawn loan account if it has been overdrawn for more than 9 months after the last accounting period. Are there tax, interest and penalties to pay?

In the circumstances you describe, there are implications for the company and the director.

If the loan has not been repaid within nine months and one day after the end of the accounting period in which the account went overdrawn or the overdraft from a previous accounting period increased, then the company will have to pay a tax charge of 25% of the overdrawn balance or 25% of the increase over the previous year. As the loan is partially repaid or fully repaid, a claim may be made for repayment of some or all of the tax at a time which is dependent on how long the loan was outstanding. Take a look here for more information.

The loan needs to be disclosed in the CT600A corporation tax return supplementary pages here.

The director may have to pay income tax on a benefit in kind as you will read under the heading "If the loan was more than £10,000 (£5,000 in 2013/14) here. The loan needs to be reported on a P11D and the company will pay Class 1A NIC on the benefit.

I hope this helps but let me know if you have any further questions.
Customer: replied 3 years ago.

Is it correct that the overdrawn director's loan should be reported on the current year's CT600A?

However, the company is not registered for PAYE purposes and therefore we do not have a PAYE reference number. Therefore, we haven't submitted any P11D for this director. What do we do in this case?



The loan should be reported in the CT600A for the accounting period during which it occurred. The tax on the loan should be paid at the same time as the corporation tax on the profits, normally nine months and one day afte the end of the accounting period.

You need to set up a PAYE scheme which you can do here.
Customer: replied 3 years ago.

The overdrawn director's loan was about £80,000 in last year's accounts but we didn't report it on the CT600 for that accounting period since we prepared the accounts about 4 months after the accounting period finished and there was no tax due at the time on it at the time. Should we therefore report it on this year's CT600?

I will set up a PAYE scheme for the company now.

You ought to amend the earlier CT600 if the loan was taken out during that that earlier accounting period.
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