Loan by Director to a close Company.

Loan by Director to a close Company.

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Can anyone help me with the mechanics of operating a Directors loan account, i.e. money lent by a director in a close company to fund asset purchase. I remember many years ago there was a form for filing interest paid under deduction? I assume this still applies in that when I make an interest credit to the Director's account it has to be taxed and there is some method of payover?

Any help gratefully accepted, I am up to speed with having it at a commercial rate etc, not a special bit of planning just routine, ignorance!

thanks

Brendan

Brendan Morrissey

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By User deleted
01st May 2007 09:10

Form CT61 - Quarterly
The requirement for tax deduction depends whether the loan is a "long" or a "short" one. I can't give you a quick definition of the differentiation between the two since Tolley's Corporation Tax 2006-07 in front of me at 1300 odd pages has a deficient index !

However in my experience tax on interest paid on directors loans has always been the norm, using form CT61- completed on a calendar quaterly basis, except if the FYE is not a calendar quarter date, then completed for a shorter period to that date.

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By billgilcom
01st May 2007 10:49

Annual interest
Not having Tolleys and doing it from memory (dangerous I know as I can usually remember things that happened 40 years and taxing statute changes every year) ...... as opposed to short interest .....

Annual Interest has a quality or expectancy of duration in excess of 365 days hence the word annual. Interest that is rolled up over a period in excess of 365 days would also be long. Tax deduction has to apply from long or annual interest.

Short interest on the other hand is interest which is advanced for less than 365 days.

Directors loan interest would normally fall into the long category

regards
[email protected]
http://www.wamstaxltd.com

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