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Is the CT61 return dead?

Is the CT61 return dead?

Didn't find your answer?

I have done a little bit of research on the internet and cannot find the answer to the question but with the introduction of the 'Personal Savings Allowance' resulting in banks paying all interest gross, does this mean the CT61 return becomes redundant.

Are Company's now able to pay gross interest to directors who have loaned them money, instead of deducting 20% and paying the net amount.  I would love to hear your thoughts on this and whether interest now becomes a much more viable option, especially if the administrative burden of quarterly CT61 returns is removed.

Many thanks in advance.

Replies (28)

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Portia profile image
By Portia Nina Levin
08th Feb 2016 13:26

Not all companies are banks or deposit takers. The requirement to deduct tax on yearly interest is not, I believe, affected.

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By Jeddyknight
08th Feb 2016 13:31

Thank you for you response Portia, This is as I suspected but I couldn't find a definitive answer and thought I would see if people here were of the same thought process.

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RLI
By lionofludesch
08th Feb 2016 14:02

Barely breathing

It is, however, barely breathing.

I can't recall the last time I completed one.

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By andrew55
08th Feb 2016 16:28

Still living

I do one a year!

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By Jeddyknight
09th Feb 2016 09:01

I haven't completed one for a long time now. Maybe it is time that they are put out of their misery with the upcoming introduction of the PSA.

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Replying to andrew55:
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By Slowplaypo
26th Oct 2016 18:16

By Andrew55

I take it you calculate the interest annually and it is 'paid' just once in the year. Should the loan agreement state that it is based on an annual calculation rather than say quarterly?

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By jon_griffey
09th Feb 2016 10:36

RTI returns of interest and dividends

I can't think of any remaining HMRC returns that have to be filed on paper other than form CT61.

However far from being a quaint old-school relic destined for the scrapheap, I foresee that it will soon return with a vengeance.

HMRC will want the digital tax accounts pre-populated with interest and dividends. This will be done by requiring companies to file electronic CT61's on an RTI basis.

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RLI
By lionofludesch
10th Feb 2016 17:10

Death ?

jon_griffey wrote:

HMRC will want the digital tax accounts pre-populated with interest and dividends. This will be done by requiring companies to file electronic CT61's on an RTI basis.

Actually, I agree with Jon.

If HMRC are to pre-populate returns - sorry, digital tax accounts - with interest and dividends, they'll need to have some numbers.

The old CT61 may well be dead in its current or ACT forms but there could well be something else instead.  In particular, we'll need to report each shareholder's dividends, not just the total.

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By darrenwilliams
24th Feb 2016 10:00

I fear this to

jon_griffey wrote:

HMRC will want the digital tax accounts pre-populated with interest and dividends. This will be done by requiring companies to file electronic CT61's on an RTI basis.

 

I have thought this to, the amount of time that will be spent, yeek!

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By gbuckell
09th Feb 2016 11:48

Non banks

I believe there were some comments in a consultative document last year about the possibility of removing the requirement to deduct tax from interest paid by non-banks. If implemented this would of course do away with the CT61. But, as far as I am aware, this has gone nowhere.

Of course, even if the requirement to deduct tax is removed, would there in future be a requirement for anyone paying interest to report it to HMRC? The CT61 comes back again!!

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By Exector
09th Feb 2016 12:58

Digital by default

We submit  CT61 returns on a regular basis for a number of CT clients and recently answered an HMRC "customer" survey about the future of CT61 returns. Implication was that  they will be retained, but likey to move to an online filing process at some point tba.

 

 

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By Jeddyknight
09th Feb 2016 13:27

Interesting to hear that there have been some surveys done, it makes sense for it to move to online filing.  

Thinking on what gbuckell said earlier, there would need to be some element of reporting due by one party or another to HMRC to disclose the interest paid so the CT61 will never pass on.

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By Mature Student
10th Feb 2016 16:58

Still done here ...

As a life assurance and pensions company, we still complete these quarterly mainly for tax withheld on annuities paid. It is a royal PITA, and a huge administrative burden (the whole acting as unpaid tax collector for annuitants, not just the CT61) 

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By douglasganderson
10th Feb 2016 17:16

Personal Savings Allowance

Can anyone confirm that the new personal savings allowance applying from 6th April 2016 can be used against interest paid to directors on their loan accounts.

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Tim Good profile image
By Tim Good
10th Feb 2016 17:59

PSA and loan accounts

Yes it can. Many directors do not bother to take interest on their credit balances so it might be worth putting a formal agreement in place before 6 April 2016. For many the optimal salary will be £8,060 with up to £8,940 of gross interest then being tax free.  The company would need to deduct tax and complete the CT61.

I have produced three apps to do the tax calculations; the salary v dividend analysis; and the incorporation analysis. Email my software company for details!

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By gordonb
10th Feb 2016 17:23

Tax deduction statement template

Is there a standard layout for an interest statement to be issued to  investors in a small limited company?

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By Rodney Richards
22nd Feb 2016 19:40

PSA - treatment of banks v companies

It does seem a bit illogical if banks will pay interest to individuals gross, but companies will have to continue paying it net.

Having said that it would be unexpected and less fun for accountants if the tax system was to be made logical. 

Incidentally, is it not £3,940 of gross interest tax free in the above example (assuming no other income)?  It is anyway a rather heavily contrived situation, given current interest rates.

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Tim Good profile image
By Tim Good
22nd Feb 2016 19:56

It's doing my head in!

The £8,940 is £2,940 of PA, £1,000 of PSA and £5,000 of SRB.

Download my app at https://www.dropbox.com/s/59u1mfgigoeawec/Taxpert3.1.4demo.zip?dl=0 or call 01869 255797 or email [email protected].

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By Rebecca Cave
23rd Feb 2016 09:46

How much capital would the company need to hold?

Tim's figure of £8940 interest is quite theoretical. As the transaction would be between connected parties ( shareholder/ director and the controlled company) it should be "priced" at market value. Thus a market rate of interest should be used. What is a market rate? - That would depend on what the company could borrow at from other sources.

Lets say that market interest rate was at the high end: 8%. Based on 8% in order to receive £8940 interest the director would need to lend the company £111,750.  What owner/ director has that level of cash lying around?

Say the director does have a large amount of cash to lend to his company. That cash needs to be used for a productive purpose by the company. If it sits in the company's bank account doing little, there is a danger that the company wil lose it's "trading" status for entreprenuers' relief. Also the payment of interest on those funds may not be tax deductible as the funds are not used for the purpose of the trade.

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By sheree
24th Feb 2016 17:57

Investment in property company

I have a director who has borrowed personally and then lent his limited company the £500k to buy two student lets. I am assuming that there would be no restrictions on his company paying him interest at or even below the current rate to achieve the required £8940 interest this model requires? And getting the full tax relief in his personal tax return?

Please advise if I have this wrong

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Replying to Rebecca Cave:
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By BryanS1958
29th Nov 2016 23:19

I don't agree that 8% is high end (unless that is a month:-) ). A secured bridging loan will often be 1% a month plus arrangement fees, so an unsecured loan to a company could well justify an even higher rate.

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Tim Good profile image
By Tim Good
23rd Feb 2016 12:26

Convert share capital to loan capital?

Suppose there is share capital of £100,000. Consider converting some of that to loan capital at a commercial interest rate. Or suppose a director shareholder has a positive loan account of £100,000 but the company is not paying interest.  Consider a formal agreement between the director and the company that from 6 April 2016 interest is paid at a commercial rate. I agree that it must all be commercial.

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RLI
By lionofludesch
24th Feb 2016 09:46

Nice idea, Tim, but most of my company directors struggle to get to £100 in share capital, let alone £100,000.

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By roblpm
14th Mar 2016 09:23

Any definitive answer??

Bump!

Has anyone had a definitive answer to the question of non banks paying interest gross??

References??

Cheers

Rob

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By Jeddyknight
03rd Jun 2016 12:08

Has anybody seen anything more definitive on this matter yet, as we are now a couple of months into 2016/17?

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Replying to Jeddyknight:
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By Exector
06th Jun 2016 09:01

Yes companies should still be deducting Income Tax at 20% on interest payments to individuals and Yes the payment should be accounted for by quarterly submission of forms CT61.

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By JimH
21st Oct 2016 11:42

Does short term loan from an individual - repayable in less than a year - with interest paid at term, escape the requirement for the company to deduct 20% tax file and file a single form CT61 ?

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By Justin Bryant
21st Oct 2016 13:51

Yes. There are useful comments re yearly interest etc. in this case:
http://www.bailii.org/ew/cases/EWHC/Ch/2016/2492.html

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