Overdrawn directors’ loan accounts- everything you need to know
An overdrawn director's loan account is a loan that has not been repaid. This particular money drawn by the director is not classified as salary or dividends. These overdrawn amounts are termed ‘assets’ as long as they are not returned. Often loans to the directors or other employees are used for remuneration arrangements. In simple words, we can say that a director’s loan account keeps the record of the company’s financial transactions with the director and their details other than salary dividends. Keeping track of the money and accounting is important to avoid delays in repayments, as it cannot exceed 9 months.
It needs to be carefully regulated and managed as there are various tax issues related to it that can cause trouble in the future. The case of paying back the loan just to borro...