[Question] Deemed dividends of members loan

[anon1]

Hello,

I'm new to the forum and to company taxes. I generally work in the individuals tax systems so please correct me if any assumptions are incorrect.

I have come across some confusion reconciling the new dividends tax system with personal fringe benefits as per the fourth schedule.

My client (owner of the CC) transacts on a day to day basis through their loan account. They also receive a salary month to month which is paid out. In previous years the total at the financial end of year was treated as an interest free loan and PAYE was paid on the difference between the official rate and paid rate (0%) as a fringe benefit. However it now seems that this interest free loan is also seen as a deemed dividend and the difference in interest is taxed at 15% as dividends tax. I can't find clarification about whether it must now be taxed under both systems or whether one takes precedence.

Thanks for your time.

[CLIVE-TRIANGLE]

I guess it depends on how the loan is actually structured. If it is a loan with fixed repayment terms and so on, you should continue as you were.

If the balance is the more the result of day to day transactions etc, you should likely use the dividends route.

It is one or the other and certainly not both. To make it worse, the first method attracts VAT as well.

[Dave A]

To make it worse, the first method attracts VAT as well.

VAT on interest?

Deemed fringe benefit

[CLIVE-TRIANGLE]

Yip. Sod's law.