Director's loan. Paperwork

[era]

Hi all,

I am the only director with 51% of shares. I plan to take a director's loan for more than £10000. My co will charge 3% interest on the loan.
Questions are:
1. Do I need to have a written resolution from a board meeting? I.e. something saying lts loans <name> £XXXX at 3% interest.
2. When I pay back there will be 2 amounts going to my ltd - the capital and the interest. How do I record the interest? I can not issue myself an invoice, then what? What about VAT on that interest?
3. Intentions and arrangements rule - I plan to repay the loan before the end of the accounting period in full. If I decide to take a new loan say 45 days after that, will the Intentions and arrangements rule apply?

[northernladuk]

You are willing to bugger around with 10k of company money based on the advice from fellow contractors and the hope an accountant might advise you for free if he's not busy?

Surely your accountant is the best place to go as getting this wrong will cost you far more than you pay them..or accountingweb.

I also thought that even if you repay after the 45 days or whatever rule and take it out again they can look at this in the future and decide the this is income and not a loan even if you follow into the letter for each loan. Happy to be corrected on this though but look in to it very carefully.

Have you researched any articles on the web such as this one...

http://www.rossmartin.co.uk/companie...ccount-toolkit

[northernladuk]

Erm.. all that said..

Is this from this 'Dormant company' you don't fully understand?

http://forums.contractoruk.com/accou...n-queston.html

IMO you are playing with fire and should going to get professional advice.

[Lance]

Erm.. all that said..

Is this from this 'Dormant company' you don't fully understand?

http://forums.contractoruk.com/accou...n-queston.html

IMO you are playing with fire and should going to get professional advice.

or other 'high risk' activities like this
http://forums.contractoruk.com/accou...ml#post2331411

[TheCyclingProgrammer]

As far as paperwork goes, I would document as much as you feel is necessary to make it clear you are taking a formal loan from the company, how much, what the interest rate is and how the interest is calculated.

Check with your accountant if HMRC have any particular rules about how you calculate the interest. You could calculate it daily and credit the accrued interest to the DLA on a monthly basis, for example.

Interesting point regarding VAT. AFAIK interest is exempt from VAT however if you're on the FRS you normally include exempt supplies in your FRS turnover so you may have to account for VAT on the interest payments, even if you don't charge VAT. Check with your accountant.

I'm sure you're aware of the s455 tax charge implication if you do not repay the loan within 9 months of your company year end.

Whether or not the intentions and arrangements rule applies depends on how much the loan is. If it's less than £15k then the 30 day rule applies. If it's more than this then the intentions and arrangements rule applies - there is no fixed time limit and HMRC can choose to treat any subsequent loan following a repayment as a continuation of the previous loan and apply s455 if they believe the repayment was a sham to avoid it.

Needless to say all of this should have been discussed with your accountant and I wouldn't advise proceeding until you have done this.

[northernladuk]

or other 'high risk' activities like this
http://forums.contractoruk.com/accou...ml#post2331411

Forgot about that one. Car crash waiting to happen.