Directors Loans and BIK

[Isotope]

I have loaned money to my company over a period of years but never withdrawn it. I think it's about £5k in total.

Last year I have taken out a £40k loan from my company in August 2020 and I have repaid 34k of it in Feb 2021 - £6k is still outstanding. My company accounting yar ends in March.

Is it better to declare this is a BIK or to pay interest on the amount at the HMRC rate of 2.25% so there is no BIK.

What are the tax implications and accounting issues?

[northernladuk]

Did you ask your accountant?

[Isotope]

Did you ask your accountant?

Yes, but he never got back to me and now has taken early retirement due to covid. So I need to find a new accountant as well! But don't want to mess anything up in the meantime.

[ladymuck]

Would you not offset what you've loaned the company against what you borrowed, leaving a net £1k owing? As that's under £10k you should't need to declare it. Make sure the loans are documented properly. A loan ought to attract a commercial rate of interest too...

[northernladuk]

Yes, but he never got back to me and now has taken early retirement due to covid. So I need to find a new accountant as well! But don't want to mess anything up in the meantime.

With this amount of money and potential penalties not wanting to mess up means get a new accountant and get them to sort it. Shouldn't take long as they are busting for business. Give Sarah Solo a call at PaperRocket a call. She's on the ball and should be able to pick this up quickly for you.

[NowPermOutsideUK]

What would happen if the director loan from the person to the Ltd was substancial ? Use 100K as a round number for a full year

Could you as a personal tax payer charge the Ltd interest and if so what rate is appropriate?

[ladymuck]

What would happen if the director loan from the person to the Ltd was substancial ? Use 100K as a round number for a full year

Could you as a personal tax payer charge the Ltd interest and if so what rate is appropriate?

There's heaps of threads about director loans. No need to start another one. This was a specific question whilst inbetween accoutants.

[Isotope]

Would you not offset what you've loaned the company against what you borrowed, leaving a net £1k owing? As that's under £10k you should't need to declare it. Make sure the loans are documented properly. A loan ought to attract a commercial rate of interest too...

Beneficial loan arrangements - HMRC official rates - GOV.UK

I looked at that and it read 2.25%.

[Isotope]

With this amount of money and potential penalties not wanting to mess up means get a new accountant and get them to sort it. Shouldn't take long as they are busting for business. Give Sarah Solo a call at PaperRocket a call. She's on the ball and should be able to pick this up quickly for you.

Thanks. I am meeting / well calling some Accountants next week. In the initial meeting should I tell them everything or wait till afterwards? During the initial meeting I am not his client so where does client confidentiality fall?

I have only ever had one accountant.

[Lance]

Thanks. I am meeting / well calling some Accountants next week. In the initial meeting should I tell them everything or wait till afterwards? During the initial meeting I am not his client so where does client confidentiality fall?

I have only ever had one accountant.

Why do you care about client confidentiality?
Accountants aren't known for sharing what is probably really dull information about people, just because they're not a paying customer.
It would be bad for business.
In breach of their professional obligations.
And quite possibly illegal depending on the details.

Those three things will keep them schtum a lot more than you paying them £100 a month.