Repay directors' loans or salary?

P

popstar

Registered User
Messages
28
my husband and i are 50% shareholders of ltd company. we incorporated last April (from soletrader status) and loaned the company 51,000 euros as working capital.
since then we have taken 38,000 euros in salary - i've deducted expenses. we have one employee and i'm just about to file his P35 on ROS.

I've just realised from reading various posts on this forum, that I should probably have filed PAYE and S class PRSI for my husband and I.
However, could we count the 51,000 we invested last April as a director's loan to the company and the drawings for the last 9 months as repayment of this loan?

I'm in a pickle (to say the least!) about this as I have no idea what our tax liability would be if we need to go down the PAYE and PRSI route. Or what our tax liability might be? I've figured it as 38,000 x 20% tax rate + S class PRSI = 11,300 euros. I think I might also have to pay PRSI as I work in the company and am a 50% shareholder.

Can anyone advise on what I should do at this late stage? My plan at the moment is to call the Revenue first thing ....

Many thanks,
 
Re: Can I repay director's loan instead of taking a wage?

i'm assuming that you're both own 50% each and it's your own company.

yes, the €38,000 drawn down can be deemed repayment of the loan that you and your husband injected personally into the company.

even in the event that you treat the €38k as salary, I'm not sure where you get a liability of €11,300. Tax would be (€38,000 x 20%) less tax credits* = €7,600 - €3,660* = €3,940. PRSI would be €38,000 x 5% = €1,900. Total: €3,940 + €1,900 = €5,840.

Anyways, relax, it's immaterial. Whoever prepares your accounts will show the ins and outs on your directors loan account. Cr: €51k initial loan. Dr: €38k being amounts drawn down. Balance to date: €13k cr.

(*: assuming no credits due other than married credit)
 
Re: Can I repay director's loan instead of taking a wage?

popstar said:
Can anyone advise on what I should do at this late stage? My plan at the moment is to call the Revenue first thing ....

Many thanks,
Click to expand...

Are you sure you don't need an accountant? Sounds to me like you should at least talk to one seeing as how you were unaware that you and your partner were liable for PAYE and PRSI.
 
Re: Can I repay director's loan instead of taking a wage?

Thanks for your replies.
Billythefish:I got to 11,300 because I assumed that as directors of the company that we are not entitled to any tax credits. I read a few posts on AAM today on that subject. But I could be wrong?
 
Everyone is entitled to the standard credit. That's €1,830 per person (in 2008 and 2009) so €3,660 for a married couple. What you're not entitled to is the PAYE credit which is an additional €1,830. That's what the standard employee receives which you don't as you are a propietary director.

I agree with askalot, it sounds like you should hire an accountant. Having one would have saved you a couple of sleepless nights here.
 
You and your husband should take salary of €9,150 each at a minimum to utilise your married tax credit. You will be liable for a small amount of employees PRSI but it would be unwise to not utilise your tax credits because of this. You are not utilising your 20% standard rate bands by doing so which is a pity.

BTW you should take a payroll course in order to make sure your complying with all your statutory obligations. There has been quite a few changes in the last budget with income levy etc and it is important that you or your husband has an understanding of the payroll issues.
 
Whether you should use your standard rate band is debatable. Consider: if the company was to cease trading in the meantime you would have paid 20% tax unnecessarily.
 
Many thanks Henrieta, this sounds like a good solution for us. As I have already filed the P35 for 2008 for our employee, should I now file a supplementary P35 with this information? thanks again!
 
I am a director in a company & have received a directors loan (80k) in the past to renovate a propert myself. the trouble is that by now selling the property the margin of profit is nill and therefore does not put me in a position to repay the directors loan????
Can anybody recommend anything I can do seeing as im not in a position to repay the loan and because of the down turn the company cashflow needs this loan to be repaid, at least in part....
 
You must log in or register to reply here.
Back
Top