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Directors Loan Account

Directors Loan Account

I am wondering about paying interest on a Directors loan account.

Is it paid Gross re Net of tax, if net what rate of tax is deducted.?

How and when is it paid to the HMRC?

Finally what rate of inteest would be appropriate?

I would be grateful for any help from anyone who has done this.


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20th Dec 2012 11:39

Avoiding the benefit

Has to be paid gross, and the company interest in the NTLR pot.  The interest has to be actually paid, you cannot just capitalise the interest to the loan account.

Has to be at least the official interest rate which can be found here: http://www.hmrc.gov.uk/rates/interest-beneficial.htm


For more on beneficial loans see: http://www.hmrc.gov.uk/manuals/eimanual/EIM26100.htm


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20th Dec 2012 12:03

I would

also prepare some meeting mins to agree that if the directors loan ever exceeded £5,000 then an appropriate % of interest (perhaps based on say 1% above the HMRC rate) would be charged using the same method of calculation as if it were a P11d loan to reflect a commercial rate of interest paid. 


This would show the revenue that not only was interest paid, but there was an obligation per the mins to pay it....can't find the details right now but i am sure this is one of the 'hmrc guidelines' for allowing such a payment instead of showing it on a p11d.

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20th Dec 2012 12:35

There is an assumption in the first 2 replies

That may be incorrect.

As far as I can tell, the OP does not specify who is paying the interest to whom.

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By DMGbus
20th Dec 2012 13:43

Interest payable to directors on credit balance DLA

Quarterly (*) accounting via form CT61 is the method used to pay over the 20% tax deduction from interest paid by a Ltd Co to one of its directors or shareholders in consideration of them lending money to the company.

(*) There are exceptions where the company's financial year end does not match a calendar quarter end in that short period CT61 forms have to be rendered.  An unfortunate thing about form CT61 is that it cannot be downloaded so HMRC have to be contacted by letter or phone to get hold of such a form (and separate payslip).

However, if it is the other way round (ie. overdrawn Directors Loan Account) then the interest is paid gross to the company by the director.or shareholder concerned.



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20th Dec 2012 13:54

I fear you are correct


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