Tax Investigation Helpline

Why HMRC Investigates Director’s Loans HMRC monitors director’s loans closely because they can be used to take money out of a company without paying the correct tax. Common triggers for an investigation include:

• Director’s loan accounts that remain overdrawn for extended periods.
• Failure to declare the loan on the company’s tax return.
• Repaying and re-borrowing funds around year-end to avoid tax charges (“bed and breakfasting”).
• Loans written off without the correct tax treatment.
• Discrepancies between company accounts, CT600 returns, and personal tax filings.

If HMRC suspects errors or deliberate avoidance, they can launch a detailed enquiry into both the company and the director personally.

What’s at Risk in a Director Loan Investigation The financial and legal consequences can be severe if HMRC identifies problems:

• Section 455 Corporation Tax charges on outstanding loans to directors.
• Benefit in kind charges if the loan exceeds £10,000 and no interest is paid.
• Reclassification of payments as salary or dividends, leading to further tax liabilities.
• Penalties and interest on underpaid tax.
• In serious cases, allegations of tax evasion and potential disqualification as a director.
• Even genuine mistakes can lead to significant liabilities if not handled correctly.

How We Help

At Tax Investigation Helpline, we understand the complexities of director’s loans and how HMRC approaches these investigations. We provide:

• Immediate advice: We explain HMRC’s letter and outline exactly what your options are.
• Representation: We deal directly with HMRC on your behalf, protecting you from making admissions that could harm your case.
• Detailed review of accounts: We examine your director’s loan account and related records to ensure they are accurate and defensible.
• Negotiation with HMRC: Where issues exist, we work to minimise penalties and agree manageable repayment solutions.
• Future compliance advice: We help you manage your director’s loan account going forward to prevent future investigations.

Our goal is always to resolve matters efficiently, safeguard your position, and limit the financial damage.

Common Issues We See

From our experience, HMRC investigations into director’s loans often focus on:

• Overdrawn director’s loan accounts left unpaid after year-end.
• Personal expenses incorrectly charged to the company.
• Lack of proper documentation for loans or repayments.
• Loan write-offs not declared on tax returns.
• Misunderstandings between salary, dividends, and loan withdrawals.

By addressing these areas proactively, we can prepare your strongest defence and reduce potential liabilities.

Don’t Face HMRC Alone Director’s loan investigations can feel highly personal, as they often involve both company and personal finances. HMRC has wide powers, and without expert representation, you may find yourself facing higher liabilities and unnecessary stress.

We’ve helped countless directors successfully resolve HMRC enquiries into loan accounts. With our support, you can be confident that your rights are protected and your case is handled professionally.