TAX CHARGE ON TAKING A LOAN FROM A CLOSE COMPANY AND TAX MAIN EVENTS FOR JULY/AUGUST 2013

News: July 2013

TAX CHARGE ON TAKING A LOAN FROM A CLOSE COMPANY AND TAX MAIN EVENTS FOR JULY/AUGUST 2013

We touched on this in the last newsletter, and now we have more flesh on the bone so we can advise you on how to avoid the new tightening-up of popular arrangements which previously succeeded in avoiding any tax charge on a loan simply by making sure the loan is repaid within 9 months of the end of the company’s accounting period.

If at least £15,000 is outstanding by a participator to the close company immediately before a repayment and at that time there is an intention to re-borrow from the company, and that intention is carried out, the amount repaid is ignored and the result is a tax charge.

That could catch common arrangements where all withdrawals from the company are treated as debits to the director’s loan account and are then cleared before the 9 month limit by way of voting a dividend or salary.

That in itself should still work, as where a charge to income tax arises on the participator in respect of a reduction to the loan account by way of a dividend or salary that reduction is still taken into account.

However, the likely issue on this is that you will need to ensure correct paperwork is in place to identify the method of reducing the loan account both within the accounting period and the 9 months afterwards. That is something which often did not happen.

TAX DIARY OF MAIN EVENTS FOR JULY/AUGUST 2013

Date Whats Due
1 July Corporation tax for year to 30/9/12
6 July Forms P11D and P11D(b) for 2012/13 tax year, and where appropriate form P9D
19 July PAYE & NIC deductions, and CIS return and tax, for month to 5/6/13 (due 22 July if you pay electronically); payment of Class 1A NICs for 2012/13 (22 July if you pay electronically)
1 August Corporation tax for year to 31/10/12
19 August PAYE & NIC deductions, and CIS return and tax, for month to 5/7/13 (due 22 August if you pay electronically

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