Due to the Covid pandemic, many company directors have suffered a significant fall in income and been forced to draw loans from their companies in order to meet their living requirements.
Such behaviour could result in potentially large tax bills unless these directors’ loans are repaid within nine months following the year end. This is due to the outstanding loan which triggers a section 455 tax charge of 32.5%. This is another worry for directors, many of whom have received no financial support from the government despite a fall in income.
Comments Julia Gallagher, tax partner at Curo Chartered Accountants “Without doubt, directors paying themselves in dividends have been amongst the biggest losers from the Covid pandemic as they were ineligible for most financial packages offered by government. With a significant reduction in income, it will be impossible for many to make loan repayments in time and then there is the issue of not having the funds to pay the 32.5% s.455 tax due.”
HMRC is asking taxpayers to get in touch if they feel they will struggle to pay their tax liabilities on time.
Says Julia “Now is the time to have open and honest discussions with HMRC as if they are made aware of the situation, a payment plan can be devised, with rules around payment deadlines relaxed. We appreciate this is an unnerving time for many directors and we can help; we take a holistic approach, get to understand your finances and help you finance your lifestyle as far as possible whilst meeting your tax obligations.”
Please get in touch with Julia to discuss your situation and how you can meet your obligations all round. We do appreciate the financial strain many individuals including Company directors are under and we can advise you of your best course of action. 01527 558539.