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United KingdomVAT & Corporate TaxUpdated: Sep 13, 2026
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Direct Answer
If a director withdraws cash resulting in an overdrawn loan account, and it is not repaid within 9 months of the company year-end, HMRC imposes a Section 455 tax charge of 33.75% on the outstanding balance.
The "Bed and Breakfasting" Rule
Directors cannot simply repay the loan on day 364 and withdraw it again on day 366 to avoid the tax. HMRC's anti-avoidance rules will ignore the repayment if the intention was just to avoid the S455 charge.
Recovering the Tax
The 33.75% tax acts as a deposit. It is fully refundable by HMRC 9 months after the end of the accounting period in which the loan is finally repaid or written off.