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Accounting treatment on interest on directors loan

How to account for the tax and interest payment

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I have a director who wants to charge interest on the amount he has loaned the company.  I know form CT61 needs to be completed.  The company is paying £6000 gross interest, of which £1200 income tax will be deducted.  How should this be shown in the accounts? As the company owes the £1200 income tax, should this be shown as £6000 interest paid, £1200 other taxes (current liabilities <1 year), and £4800 to his directors loan account? (edited - sorry got the figures the wrong way around before!) Or is there some other way to show this?  I only have a few limited companies and have never bothered with charging interest on directors loans before, but this guy is insistent on doing so.  Any help would be appreciated.

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By johngroganjga
11th Oct 2021 10:45

The interest the company is paying is £6,000, so that is the debit entry that goes to its P&L account. Surely you can work out what the credit entries are, and where to post them.

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By AndrewB2499
11th Oct 2021 10:53

So basically £6000 interest on P&L, £4800 to directors loan account and £1200 to other taxes creditor?

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Replying to AndrewB2499:
By johngroganjga
11th Oct 2021 10:58

Yes of course.

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