We have just discovered a client director has lent company £100k loan, by remortgaging private hosue.
Has built up £15k in interest since taking out loan 3 yrs ago. No interest ever paid by company, no interest deduction ever put on directors tax return.
Re tax return - relief will be claimed for the loan interest paid. Clients wants company to repay interest to him, therefore minimal effect on tax return as on edge of higher rate so potential refund available from tax on interest paid by co.
Dividends are out of question as there are other shareholders to take into account.
How do we go about paying the £15k interest from the company to the director? Can we pay all £15k in one go - surely this would give rise to an enquiry by HMRC as greater than market rate interest payment in year. Do we need to go back and amend accounts for previous 3 years to show interest payments? Then how do we do CT61s - is it possible to put it all on 1 return and pay 20% en masse, or will we need to do retrospective CT61s for each quarter since the loan was taken out? Can you do retrospective CT61s? Or is it best to write to HMRC explain situation and enclose cheque for 20% tax on interest to date and ask for CT61s to be issued in future?
Any help much appreciated.