Directors Loan Account

[Jambo55]

Hi All,

If a client has taken money out of "their" ltd company, over and above that which has been declared through the payroll - it is being classed as a directors loan account, unfortunately there are no P&L reserves to enable a dividend payment, so my thoughts are the only options being, declare this as a DLA and payment 25% tax until the loan is repaid, or declare the "loan" as a bonus through the payroll although the PAYE /NICS costs will be high - am I right in thinking declaring this as a DLA and paying the 25% is the most efficient way to deal with this?

[section 44]

Yes.

[Incredulum]

What happens if you declare an illegal dividend? The shareholder is unlikely to require the shareholder to repay it... You must beware insolvency consequences, of course.

HMRC of course may wish to argue that it is still a loan; anybody with current experience on their thinking?