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Directors Loan Accounts and s455: 2014 update

Directors' Loan Accounts and s455:

2014 update

Last year, we wrote a blog post about the changes HMRC had introduced to Section 455 (s455) of the Corporation Tax Act. Here's a quick update on the subject for 2014.

s455 is a charge that close companies have to pay on outstanding loans to directors or 'participators', such as shareholders in the firm. The charge is 25% of the outstanding loan. s455 becomes payable 9 months and 1 day after the end of the accounting period in which the loan was made.

Tools to make your life easier

As many will be aware, Corporation Tax - and the tax treatment of Directors' Loan Accounts (DLAs) in particular - is immensely complicated: a fact even HMRC has acknowledged. To address this, they have produced a number of Toolkits this year to help tax advisors and agents to understand the new requirements.

A DLA toolkit was published in May 2014. It explains what HMRC calls "the areas of risk within directors' loan accounts". This is a useful guide as it explains what is and isn’t allowed and examines various different scenarios.

The Expenses and Benefits from Employment toolkit is even more useful as it shows the errors that commonly occur in reporting expenses and benefits from employment. These include:

·         Vehicles
Errors can arise when vehicles available for private use are not identified and where private fuel provided is not reported on the relevant forms

·         Travel and subsistence
Errors can arise on whether tax and NICs are chargeable on business travelling expenses

·         Personal Bills
Errors can arise on determining which directors' or employees' personal bills are allowable

·         Use or transfer of assets
The term 'asset' can cover a wide range of items. Errors can arise as there are different rules if an asset is made available for a director or employee to use rather than transferring ownership to them

·         Payrolled expenses and benefits
Errors can arise as the reporting process for expenses and benefits which are taxed through the payroll is different for payrolled expenses and benefits.

Too much detail?

Leave it to us. We know s455 and the issues around DLAs inside out and have helped many clients to reduce their corporation tax risk.

Fill in our contact form, call us on 01628 631056 or email our Senior Partner Geoff Knight at geoffk@knightandcompany.co.uk to talk about your business.