Multiple director loans (Full amount or pro rated)

Multiple director loans (Full amount or pro rated)

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Hi,

I am bit confused and not able to find any reference to this. I have taken multiple director loans during the course of financial year (total exceeds £10K limit). I am not planning to repay this loan right now and prepared for 25% CT charge. Moreover, I am ready to pay interest at HMRC approved rate however my query is should the interest charged on total outstanding loan amount at the end of the year or it should pro-rated? Any HMRC reference would definitely help.

Thanks.

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By johngroganjga
07th Jul 2015 09:26

Think of the company as like a bank with which you have an overdraft. How would you expect the bank to calculate the interest they charge you on your overdraft?

If the balance has fluctuated significantly during the year you are best advised to do a monthly / weekly / daily calculation.  HMRC's only right is to insist on a detailed calculation instead of one based on an annual average, if it makes a significant difference. If you carry out a detailed calculation that will obviously not be an issue.

No doubt you have read up on HMRC's view of how and when you need to pay the interest to the company for it to count. 

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