Interest paid by company to director

Interest paid by company to director

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Most loans to or from companies are now included within the loan relationship rules. If it is within the loan relationship rules I understand that any interest paid will be tax deductible. When will a loan from a director not be within the loan relationship rules and thus carry interest which is not tax deductable?

Assuming the director is UK resident, the requirement to deduct tax under ICTA 1988, s. 349 only seems to apply if the loan is long (over a year) and it is not a debenture. Can someone confirm this?
Rebecca Cave

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By AnonymousUser
18th Nov 2002 20:58

Interest on directors loans
Rebecca

I can't think of any situation where the loan from a director to a company would be outside the loan relationship rules. Whether it is trade related or non trade related it still falls within loan relationship rules in Schedule DIII.

Unless the company is a recognised bank or similar institution it must deduct income tax at source from interest paid to an individual, any UK entity which is not within the charge to corporation tax or any non UK resident entity (unless the requisite clearance is sought from FICO). Form CT61 still applies for these situations.

Hope this helps
Regards
Jacqui
(OK - I know FICO is now Centre for Non Residents but FICO is shorter)

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