How does s455 tax apply to Directors Loans? what if you ‘bed and breakfast’ the loan?

Directors Loan Accounts (DLA). Some guidance from our Business Accountant network below

Business Accountant

Scaring amounts

Directors (participators in a closed company) often borrow money from their companies with the intention of paying a dividend to repay the loan.

If the loan is outstanding more than 9 months after the company year end, then an extra 25% corporation tax charge is due, this is the s455 tax which is refunded when the loan is repaid as explained in this blog

http://stevejbicknell.com/2015/02/04/new-tax-procedure-for-directors-loans-s-455/

HMRC were concerned that some participators were avoiding this tax by raising funds short term to repay an outstanding loan.  They would then draw a new loan very shortly afterwards – HMRC refer to this as “bed and breakfasting”. New anti-avoidance rules were therefore  introduced in 2013.

These new rules incorporate two provisions – the “30-day rule” and the “intentions and arrangements” rule.

30-day rule

This applies where within a 30-day period:

  • a shareholder makes repayments of their s455 loan; and
  • in a subsequent accounting…

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