Beneficial loans

[Kitty Kat]

A director is £1,000 o/d at 04/04/10. They take a loan of £10,000 out on 06/10/10. They repay the £10,000 on 06/01/11.

Using the strict method, do you only count the time after the £5,000 limit is exceeded, or does the fact it passes £5,000 in the year mean all loans are caught (so all 365 days, albeit a lot of them based on the £1,000)?

[Gnome]

It's the latter.

Loans only qualify for the small loans exemption if they do not exceed £5,000 at any time during the tax year otherwise they fall within the scope of the charge.

EIM26142 is the manual page.

[Kitty Kat]

It's the latter.

Loans only qualify for the small loans exemption if they do not exceed £5,000 at any time during the tax year otherwise they fall within the scope of the charge.

EIM26142 is the manual page.

Oooooooohhh, this isn't going to be pleasant..... See the tax partner here (no, contain your astonishment, I'm not a partner yet! ) is 100% sure that not only is it a case of 'ignore it until it hits £5k then start the clock', he also is sure you can only do average or monthly calculations unless you get permission from HMRC to use the daily method.

It's a £10 difference between me doing it 'right' (all year based on the day to day balance) and doing it his way, so I will keep quiet and thus keep my job

I will feel warm and fuzzy knowing I am right, but it will be our secret methinks...

[Gnome]

I won't tell if you don't!

The rule is that the averaging rule will automatically apply unless either the individual or HMRC want to apply the strict method of calculation. There are time limits to make the election under S183 - something like 12 months from 31 January following the relevant tax year.

HMRC will only usually apply the precise method where there is a significant amount of tax at stake.

[Kitty Kat]

I won't tell if you don't!

The rule is that the averaging rule will automatically apply unless either the individual or HMRC want to apply the strict method of calculation. There are time limits to make the election under S183 - something like 12 months from 31 January following the relevant tax year.

HMRC will only usually apply the precise method where there is a significant amount of tax at stake.

No matter how you do it (average, day to day, or monthly averages) there is perhaps a couple of hundred pounds in it, so they won't lose any sleep and neither will I

Thanks.