In a recent Tax Tribunal case the judge agreed with HMRC that a detailed breakdown of directors loan account transactions is required, including dates.

The significance is that where the loan account is overdrawn (debit balance) there may be a possible P11d benefit on the director and also a tax charge on the company. A taxable benefit in kind would arise where the loan exceeds £10,000 and the interest paid is less than the HMRC official rate, currently 2.5%.

In addition, if the director is also a shareholder of a close company, there is a 32.5% tax charge payable by the company making the loan where the loan is still outstanding 9 months after the end of the accounting period.

Thus, you can see why HMRC may require a detailed analysis of transactions between the director and the company.

Note that where the loan is repaid to the company and a similar amount withdrawn within a 30 day period the tax legislation matches the repayment with the new “loan” and consequently the original loan would still be outstanding.