I have a client,sole director and employee of Ltd Co. She has bought a new car for £22990 (part ex for existing car for £10k). Wants the company to either lend her £10k towards balance or just but the car. So she has contributed £12990,2litr deisel,119g/km Co2,registered June 12,being delivered 12/11. I have calculated fuel and car benefit and know that company can claim cap allowance of 18% (is that right as gone down from 20%?) or the other route is director loan. Her year end is Mar 2013, so am I right in saying if she hasnt paid back all the loan by 9 mths after Mar 2013,the company is charged 25% tax? Is this on outstanding balance if not all repaid or initial amount lent? and is there anything else I am ,missing re conditions of directors loans?
If the company owns it then will be able to claim all running costs and you will be able to claim cap allowances at 18%. They will be charged a fuel and car benefit if use it personally.
If she owns it personally and if takes money out of the company then has to be repaid back within 9 months of the end of the year otherwise has to pay over 25% with the corporation tax payment. The 25% payment is just a payment on account and the company will get it refunded in future years as the overdrawn directors loan is paid off. Eg year 1 overdraft directors loan account £10k then need to pay £2.5k nine months after year end if not cleared. If at end of year 2 the overdrawn loan is £nil then will get the £2.5k payment refunded. Additionally, if uses personal car for business purposes can charge 45p per mile for the first 10k miles and 25p per mile thereafter through the directors loan account to the company.
Thanks thats great. I have just looked up beneficial loans on HMRC to see if the company should be charging director interest on loan and it seems to say that if director earns more than £8500 then needs to be disclosed? She doesnt earn this so does company need to charge interest as a benefical loan and is this the same as a directors loan? Confused!!!
Well, the DLA is less than £15k so she won't have to give HMRC 25% of the DLA which is one small mercy there (see the get out of jail free clauses under s455 of the CTA for details)
Of course if the DLA goes over £5k overdrawn (at any time, not just the balance at the period end), then its a P11D item at OIR of 4%
Maximum contribution allowable is £5000. Not £12990.
119g/km would be a benefit rate of 13% so list price - contribution * benefit rate is 22,990 - 5000 * 13% = £2327 p.a. (is that what you got?)
For 2012 Capital allowance on the car would be 18% as you identify. (based on list price with no reference to employee contribution)
All in all you seem to be on the right lines with just the statement in relation to the employee contribution making me worry slightly about what you may have calculated.
kind regards,
Shaun.
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Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
The £8500 is for employee's excluding directors as directors are able to manipulate their salary.
Directors who own more than 5% of the share capital of the company need to report benefits regardless of income level.
kind regards,
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Ok so am I getting this right? Directors loan for £10k granted say 1st Dec 2012,must be paid back in full by Dec 13 to not incur 25% interest. If not paid back then interest charged on outstanding balance at what date? Director has to report beneficial loan on P11D and pay interest at 4% per annum. Is this debited to their personal ac and paid to company? Sorry, thought I understood now getting knickers in a twist!!
directors loan is less than £15k so per s455 is not liable to the 25% charge but rather is a benefit which will be charged at 4%.
The 4% is a P11D item. Its on the director not the company to pay it.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
Damn it, my advice is bad and Marks is correct (no surprise there then).
yours is a case of a sole director of a close company owning all of the share capital so S455 will not apply and the £15k limit is not available to her.
The link that you gave made no mention of the £15k which was a bit cheeky of HMRC not wanting people to know about it as the information from that page is not applicable in all scenario's
Anyway, this is what happens when I read something months back and think I know it without going back and reading it again.
basically everything you ever wanted to know about DLA's but never thought to ask.
Shaun.
__________________
Shaun
Responses are not meant as a substitute for professional advice. Answers are intended as outline only the advice of a qualified professional with access to all relevant information should be sought before acting on any response given.
