Tax Planning Idea!
Directors' Loan Accounts - opportunities and risks
If a director shareholder is owed money by their company, interest payments made by the company to the director can be a tax efficient method of extracting funds. Where loans to directors remain outstanding 9 months and 1 day after the end of an accounting period this can result in the company having to pay tax at a rate of 32.5% of the loan balance. Careful planning can avoid this charge. Directors’ loan accounts can sometimes be used to enable shareholders to take short term funds from a company prior to sale.
As always, the key to successful tax planning is to seek advice as early as possible.
If you would like more information, or would like to discuss your tax affairs in more detail, please don't hesitate to contact our Tax Partners, Steve Crompton or Lucy Williams, on the details below: