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Overdrawn directors’ loan accounts: an amendment

We would like to correct the element in our recent newsletter relating to overdrawn directors’ loan accounts. We sometimes outsource the technical content of these newsletters to third parties, as in this case.

The article was written on the basis of some changes in rules proposed by HM Revenue & Customs (HMRC). In fact, after consultation, HMRC announced on 10 December that the government had decided against reform of the rules. More details can be found here.

One change affecting loans to participators (including directors) was introduced in the Finance Act 2013, with effect from 20 March 2013. This prevents an arrangement known as “bed and breakfasting”, involving loans being repaid before a nine month cut-off point and then redrawn shortly afterwards to avoid a tax charge.

Overdrawn directors’ loan accounts can still be significant, but we look very closely at every client’s circumstances year on year (if not more frequently) to ensure that any such issues are planned for and avoided or minimised.

Please accept our apologies for the original error.

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Lambert Roper & Horsfield Limited is registered to carry on audit work in the UK and regulated for a range of investment business activities by the Institute of Chartered Accountants in England and Wales. Registered in England - Company Number 4119910