Who is likely to be affected?
Close companies which make loans to their directors or make other arrangements through which directors extract funds from their companies.
General description of the measure
The rate of tax charged on loans to directors and other arrangements (currently 25%) is being specifically linked to the dividend upper rate, which will be 32.5% from 6 April 2016.
This will ensure that the rules continue to prevent individuals gaining an unfair tax advantage by
taking loans (or making other arrangements to extract value) from their companies rather than remuneration or dividends.
Our Advice – Check your Directors Loan account balance regularly!
If you are a company director and you withdraw funds from your company, it is so important to have the credit available in your Directors loan account to be able to take this draw. In our experience this is not always very well controlled or in fact very well understood.
If you would like to have a free review of your company’s accounts and in particular if there is any potential exposure to this high taxation liability, we would be pleased to meet you to set your mind at rest or at least give you an action plan to ensure things are kept in line.
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