Personal loan taken for company

Personal loan taken for company

Didn't find your answer?

We are a small company. One of the directors has taken a loan personally to use the funds in the company.

Can the company claim the interset that the director is paying on this personal loan?
Anon

Replies (3)

Please login or register to join the discussion.

avatar
By AnonymousUser
14th May 2008 14:16

Personal loan for company
What if the director does not have any personal tax liability , can he still get relief for the interest on his personal tax return, i e would he get a refund at say 22%.

If the interest on the loan is simply credited to director's loan account, would this be done net of tax and would the company still have to file CT61?

Any advice would be appreciated as this is all quite confusing. We cannot afford an accountant at this stage so we want to get this correct.

Thanks (0)
Euan's picture
By Euan MacLennan
14th May 2008 13:32

Not as such ...
The director can claim on his personal tax return for the tax relief on the loan interest provided he has invested the funds in a close company in which he holds more than 5% of the shares. The company can claim any interest which it pays to the director/shareholder as a deduction from its profits for corporation tax. However, the company must deduct income tax at 20% from the interest it pays to the director and account for it to the Revenue each calendar quarter on form CT61.

The company cannot pay the director's loan interest direct.

Thanks (0)
Euan's picture
By Euan MacLennan
14th May 2008 19:05

No, Yes & Yes
No - he cannot get a tax refund if he has paid no tax.

Yes - you would credit the net interest because that is what would be due to the director.

Yes - quarterly forms CT61 would still be required. The fact that you credit it to the director's account rather than actually paying him money makes no difference.

You really should have talked to an accountant before forming a company. Most offer an initial meeting free of charge, but even if they charge you for specific advice, it might well be worth it if it saves you all manner of penalties when you get things wrong.

Thanks (0)