Hi - I have a DL account in credit at 13000 at start of company year. At end of company year, the company makes a profit of 10000 and director takes 8500 from the DLA. Does the company pay corporation tax on the 8500 (i.e. are taxable profits 10000 or 1500)? I assume the 8500 does not go into the PL account, only the balance sheet? Apologies for being thick
The company pays tax on it's profit, it is irrelevant how much of that profit is removed from the company or how that is done. So it is taxed on the £10000 profit.
The £8500 would usually be transfered to the DLA thus the balance at the end of the year would be £4500 credit.
As Ruth said, the company pays tax on it's profits - £10k x 20% = £2k (assuming no adjustments for dep'n or cap all). It will then have £8k of retained reserves, which could be used to declare a dividend which could either be paid out to the shareholders or credited to the DLA to be drawn, tax free, as and when required.
