HMRC Steps Up Reviews of Directors’ Loan Account Tax Relief
HMRC Steps Up Reviews of Directors’ Loan Account Tax Relief
What companies and directors need to check — and what to do next.
HMRC has begun a new round of contact with accountants regarding directors’ loan accounts, specifically where companies have claimed tax relief on the basis that a loan to a director or shareholder (a “participator”) would be repaid within the permitted timeframe.
If HMRC believes a company reduced or reclaimed the temporary tax charge incorrectly, they are now asking agents to take another look — and help clients correct any issues.
Here’s what’s going on, why it matters, and how to make sure your company is on safe ground.
What HMRC is reviewing
The focus is on situations where:
- A directors’ loan balance existed at the company’s year end,
- The company claimed relief on the basis that the loan would be repaid shortly after,
- But the repayment did not actually happen within the statutory window.
In these cases, HMRC expects the company to pay (or re-pay) the temporary tax charge under s455 CTA 2010, which applies to loans made to participators of close companies.
HMRC’s letters follow earlier compliance activity — including “one-to-many” letters and reminders in recent Agent Updates — signalling that this area is firmly on their radar.
What companies should check
If your company has had directors’ loan balances in the past few years, it’s worth reviewing the position carefully.
HMRC is encouraging advisers to confirm:
- Were repayments actually made?
Not just planned — but completed. - Were repayments made within the required timeframe?
HMRC will look at the exact dates. - Do the company tax return disclosures match what ultimately happened?
Relief claimed on “expected” repayments must align with the final outcome. - Is there a clear paper trail?
Records should show repayments, write-offs, novations, or any changes to the loan.
Where the facts don’t match what was claimed, voluntary corrections can help minimise interest and potential penalties.
Why this matters
HMRC has been tightening compliance around directors’ loans for several years because:
- It’s a common area for mistakes,
- Repayments are sometimes planned but not followed through,
- And temporary s455 relief is sometimes claimed prematurely.
If your company currently has an outstanding directors’ loan balance — or previously claimed relief on the assumption that it would be repaid — now is the time to double-check your filings.
What to do if you’re unsure
If you think your company may be affected:
- Review the loan account and repayment history
- Check the year-end tax returns and relief claimed
- Confirm repayment dates against the statutory window
- Speak to your accountant early if anything looks unclear
A proactive review is almost always cheaper and easier than waiting for HMRC to raise a formal enquiry.
Talk to us about your taxes
If you’d like help reviewing your directors’ loan account or understanding what HMRC’s latest letters mean for you, get in touch. We’ll guide you through the steps, check your exposure, and help resolve any issues before they escalate.
