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Directors lending money to a company

Interest on a director lending money to a company

Hi Can anyone help, if a director borrows money personally which is then lent to his company is he able to charge the company the interest he has personally incurred in borrowing the money, and would this create any personal tax charge on the director.  The sole purpose of borrowing the money was to lend it to the company.

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By Ruddles
10th Nov 2017 16:41

Seriously? Chartered Accountants?

Portia - stop shaking the tree!

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10th Nov 2017 12:44

To answer your questions in order:

The director can charge interest, subject to agreement by the company

Yes, the interest received is taxable.

Lending money to your company isn't alone enough to qualify the interest payable by the director for relief. The company must meet conditions and the money must have a current use for the money, e.g. working capital.

When I last checked HMRC allowed a short cut (to avoid they individual having to self-assess the interest and claim a corresponding amount of relief for the interest they paid) whereby the company paid the interest on the personal borrowing by the director/employee.

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10th Nov 2017 16:36

Don't forget, any interest paid by the Company, must have tax deducted and be reported on CT61

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By Ruddles
to millyandpurdy
10th Nov 2017 16:39

I'm sure that, as a Chartered Accountant, the OP is well aware of that.

Then again, as a Chartered Accountant, ...

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