Common Mistakes to Avoid on DLAs (Director Loan Accounts)

A DLA is a record of all financial transactions between a limited company and a director.

Avoiding common mistakes with Director Loan Accounts (DLAs) is crucial for business owners to ensure compliance with tax regulations and avoid unnecessary financial penalties. Mismanagement of DLAs can lead to significant tax charges, such as the s.455 tax, and complications with HMRC.

By keeping accurate records, repaying loans within the stipulated time frame, and avoiding the inclusion of salary, dividends, and business expenses in the DLA, business owners can maintain financial integrity and avoid costly errors. Proper management of DLAs not only safeguards the company's financial health but also upholds its reputation with tax authorities.

In summary you can avoid common DLA mistakes by remembering the following:

• Adding Salary, Dividends, and Business Expenses: Avoid adding salary, dividends and business expenses to the DLA.

• s.455 Tax Charge: To avoid the s.455 tax charge, ensure that any loan taken from the DLA is repaid within 9 months and 1 day after the end of the relevant accounting period.

• Writing Off Loans: Avoid writing off a loan from the DLA.

• HMRC Refunds: HMRC will refund the tax charge if the loan is paid back.