Director’s loan account, Business tax account and Money laundering cash

When a director lends money to his company, you would expect amounts credited against that loan to be free of tax. However, that is not how HMRC interpret the situation, as we explain below. HMRC have changed what employers will see on their business tax accounts, which may resolve some PAYE payment mismatch problems. Finally, you should warn your clients about tighter regulations for businesses which receive or pay large amounts in cash.

Below is just an extract from last week’s tax tips email. To receive the full email when it is published each Thursday, simply follow the link on the right (or below, if you’re reading this on a mobile device).

Money laundering cash

Most accountants realise that they need to be registered and supervised by a professional body under the money laundering regulations. If you are not a member of a professional body you need to register with HMRC to be supervised by that department.

If you have clients who are: estate agents, currency exchangers, bill payment providers, trust or company service providers, or high value dealers, you should keep them informed about their money laundering obligations.

High value dealers (HVD) are businesses which receive cash payments of €10,000 or more for goods acquired in single transaction. As the Pound is now almost at parity with the Euro, that means making a sale at around £10,000 or more where the customer pays in cash, even over several instalments.

This receipts threshold has always been set at €10,000, but a business is also a HVD if it pays for goods in cash worth €10,000 or more. This threshold used to be €15,000, but was reduced to €10,000 with effect from 26 June 2017. The business must not accept such cash payments or make such large cash payments until it has registered with HMRC as a high value dealer.

There is a fee to pay with the registration, and an annual renewal fee. If the business does not comply with the money laundering regulations HMRC can levy a penalty, and if non-compliance persists they will consider criminal prosecution.