XBert Type: Standard
Accounting Software: Xero, QuickBooks Online, FreeAgent, MYOB
Country Restriction: United Kingdom only
Risk Type: Tax Risk
Business Function: Bookkeeping
Overview
This XBert watches every director’s loan account on the balance sheet and flags any where the balance has gone the expensive way — the director owes the company money. Under section 455 of the Corporation Tax Act 2010, a close company pays tax at the dividend upper rate on any loan to a director or shareholder that is still outstanding nine months and one day after the end of the accounting period in which it was made: 35.75% for advances made on or after 6 April 2026, and 33.75% for advances made between 6 April 2022 and 5 April 2026. The tax is refundable under section 458, but only nine months after the end of the period in which the loan is repaid, so it is a real cash cost in the meantime. Caught early — while there is still time to repay, or to clear the balance with a dividend or bonus — none of that tax needs to be paid.
What it does
XBert reads the latest balance sheet for each client file, picks out the director’s loan accounts, and raises a flag when a director owes the company £1,000 or more. Each alert shows:
the account and the amount the director owes;
the potential s.455 charge at both rates (35.75% for advances from 6 April 2026, 33.75% for earlier advances), since a running balance can mix the two;
whether the balance is above £10,000 — the point at which a beneficial-loan benefit in kind arises (a P11D entry for the director and Class 1A National Insurance for the company) unless interest at HMRC’s official rate is charged; and
the date the loan must be repaid by — nine months and one day after the accounting period end. On Xero, QuickBooks Online and MYOB the actual date is calculated from the file’s year end (for example a 31 March year end gives 1 January); FreeAgent does not share the company’s year end, so on FreeAgent files the deadline is explained rather than dated.
The alert clears itself once the balance is repaid or falls below the threshold.
How it works
XBert recognises director’s loan accounts by name across all the naming styles the ledgers use — FreeAgent’s “Director Loan Account: [name]”, Xero’s “Directors’ Loan Account” and its variants, “Director’s current account”, “Loans to directors” and “DLA”. It then works out which way the balance faces. The accounting systems do not agree on how balance-sheet figures are signed — an overdrawn loan is reported one way by FreeAgent and the opposite way by Xero, QuickBooks Online and MYOB — so XBert normalises the direction for each system before applying the test. That is what makes sure an overdrawn loan is never mistaken for a credit balance (the company owing the director), and vice versa.
A flag is raised only when all of the following hold:
the account is a director’s loan account by name (interest accrual accounts, and FreeAgent’s other per-person accounts such as expense, salary and benefit-in-kind accounts, never match);
the account is classified as a liability, equity or asset account on the balance sheet; and
after the direction is normalised for the accounting system, the director owes the company £1,000 or more.
Credit balances — where the company owes the director — do not trigger this XBert; they are a different (and far less costly) position.
Example/Use Case
Sam is the sole director of Harbourside Design Ltd, year end 31 March. Over the year the company pays £18,400 of Sam’s personal outgoings, all coded to the director’s loan account, and no dividend is declared. By 1 January — nine months and one day after the year end — the loan is still outstanding, so the company pays £6,578 of s.455 tax on top of its corporation tax. Because the balance was over £10,000, Sam also has a beneficial-loan benefit in kind to report on a P11D, and the company pays Class 1A National Insurance on it. Had the overdrawn balance been spotted in August, a dividend or bonus could have cleared it before the year end, or Sam could have repaid it before 1 January, and none of that tax would have been due.
Accounting software
This XBert runs on the balance sheet from Xero, QuickBooks Online, FreeAgent and MYOB.
Which countries it supports
This XBert applies to the United Kingdom only. It is built on s.455 and s.458 of the Corporation Tax Act 2010 and HMRC’s beneficial-loan rules.
Processes
Business area: Bookkeeping (compliance).
To resolve a flagged account:
Select Resolve Now to open the account in your accounting software.
Confirm the balance is a genuine loan to the director rather than unposted salary, expenses or a dividend that was declared but never entered — if it is, post the missing entries and the balance clears.
If it is a real loan, plan how it will be repaid before the nine-months-and-one-day deadline: a repayment from the director, or a dividend or bonus voted to clear it (both taxable on the director).
Watch the “bed and breakfasting” rules: a repayment of £5,000 or more that is re-borrowed within 30 days is disregarded, as is any repayment made intending to re-borrow £15,000 or more.
If the loan will still be outstanding at the deadline, budget for the s.455 charge, include the loan on the CT600A supplementary pages, and check whether a beneficial-loan benefit in kind needs reporting on a P11D.
Once the balance is cleared or the charge has been dealt with, mark the XBert as resolved.