Close Company Loan Interest Treatment

Close Company Loan Interest Treatment

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I have a Close Company with 3 Directors and equal shareholders. They all have lent money to the Company but not in equal amounts.
To be equitable I intend to charge interest on those loans at a commercial rate (say Base +5% to reflect the business risk.)

Question is the loan interest taxable and Tax has to be paid over, if charged against profit but only credited to the loan accounts and not paid to the Director?

Or is it treated as having no tax consequence until it is paid to the Director?

Any Guidance gratefully received!!!
Brendan Morrissey

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By AnonymousUser
06th Jan 2006 13:27

There are a couple of points here
Firstly is there a loan agreement in palce for any of these loans that say interest will be due? Just a side thought.

Secondly the crediting to the loan accounts is paying it. So the distinction is not relevant.

Thirdly make sure and do the CT61s and deduct the tax from the interest paid as well - often missed.

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