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How do I repay a Director's Personal Purchase using the DLA?

Hi. I would appreciate some assistance on the following…

A personal purchase of £900 has been made via the company debit card on a VAT registered limited company. I have tagged this to the DLA as per the QF guides to ensure the VAT is dealt with by QF and the DLA account is showing a £900 credit. Is it possible to zero the DLA by marking this transaction as a salary drawing? Or does it need to be part of the year end accounts?

Thanks in advance
Carolyn

If it was a salary it wouldn’t be a purchase so you can’t do both. To make the £900 a salary payment you would tag it as salary, not a purchase.

If it’s a personal purchase then you shouldn’t be recording anything to do with VAT in QuickFile - the £900 is simply a bank transfer from the company current account to the DLA and represents the fact that the director has effectively “borrowed” £900 off the company for their own personal use.

That £900 balance will sit there on the DLA until such time as either the director pays it back, or you next run a PAYE salary payment or dividend payment to that director - rather than the director taking their salary in cash you’re using it to reduce (or eliminate) their debt to the company.

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Thank you both. I have set it as a salary payment and checked it isn’t included within the VAT report for HMRC.

Not sure that’s what Ian meant.

Don’t tag the 900 as a salary payment. It’s tagged as a dla.

You create a journal to record a salary due in the usual way and offset that journal with the dla as payment instead of the bank.

Have you actually paid them salary (i.e. done a PAYE pay run in your payroll software, calculated the appropriate gross pay amount such that the net due to the director after deduction of income tax & NI is £900, and submitted a corresponding RTI FPS)? If not then it isn’t a salary payment, it’s a bank transfer from the current account to the director’s loan.

At a later date when you do run PAYE or declare a dividend, then you can mark that payment as going out from the director’s loan in order to cancel out the director’s liability to the company, as an alternative to the director paying back the money in cash.

Thank you. I’ll undo all that and mark it as a DLA. Where do you make the payment as going out from the loan? I don’t have any options on the banking screen where the D Loan Account is shown and I can see the £900 entry. Thanks again,

The DL account will (and should) remain with a £900 balance until something happens to change that fact.

  • if the director pays back the £900 loan to the company then you’d tag the money in on the current account as a transfer from the DL account, which would create the corresponding money out transaction on the DL automatically
  • if you settle the loan by paying the director a PAYE salary payment, then in the journal when you run the payroll you’d put the “net wages” credit line against the DL bank account nominal code instead of the usual net wages balance sheet code. This journal line will create a “money out” transaction on the DL dated the same as the payroll journal date
  • if you settle the loan by declaring a dividend then you could manually create an untagged “money out” transaction with the “new transaction” button at the top of the DL bank account view for the appropriate dividend date, and tag that as a dividend
  • or you can just leave the balance there - if the director were to make company purchases with their personal funds, for example, these purchases could be tagged as paid from the DLA which would reduce the liability by the corresponding amount.

Thank you so much Ian. I was looking for an automatic tagging feature and was totally flumoxed. This was the answer I needed.

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