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Do I need to repay my directors loan before liquidation?

The quick answer

No, you do not need to.

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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.

tip

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

Author: David Kirk - ACA FABRP
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Just a quick email to say a heartfelt thank you for your very calm, considered, expert advice regarding my circumstances on Tuesday. Things looked bleak before you explained my options much more clearly, in simple layman’s terms.
Rob Elliott (14th December 2021)

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David Kirk

Licensed Insolvency Practitioner