The release of an overdrawn directors’ loan account balance occurred at the time a settlement agreement between the director- shareholders and the company was executed and was taxable on the individuals in that tax year.  

The appellants were directors of a company (‘ALA’) and accrued debts to the company in respect of loans it had made to them through a directors’ loan account. The business was providing car finance to the motor trade through the internet. ALA commenced trading on 1 June 2002 and at all relevant times, the appellants were the two directors and participators of the company.  

On 26 September 2012, having encountered financial difficulties, ALA was placed into creditors’ voluntary liquidation following a meeting of its creditors. The appellants had incurred a debt to the company of £1,009,063 before the settlement agreement was entered into by them on 28 October 2013, ALA having