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Do I need to repay my directors loan before liquidation?

The quick answer

No, you do not need to.

working on a computer at insolvency firm

In more detail

If you are about to do a Members’ Voluntary Liquidation, then we can distribute the overdrawn directors’ loan to you as a distribution in specie. This means you do not need to pay it back.

We effectively transfer the company asset, of the loan you owe back to your company, to you and this cancels out the loan.

You may have paid tax on the overdrawn loan (called section 455 tax) and then we reclaim this back after the liquidation.


Tax: It can take nine plus months for HM Revenue and Custom to repay Section 455 tax to us. So be careful if you are relying on this money as it does not come back quickly.

More questions in this section

David Kirk


David Kirk ACA FABRP

We have just worked with Kirks to complete the closure of our company. Everything went smoothly and professionally. I would recommend this firm and the staff who were very very helpful and quickly finalised everything. Thank you Kirks.
Carol Hill



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David Kirk

Licensed Insolvency Practitioner