Director loan account query

[northernladuk]

That 4% interest sounds low- could I for example take a directors loan of say £40,000 and for the subsequest years pay the 4% interest until I repay it?

And if I could do the above, is it one of those grey areas where you can do it but it is a bit dodgy and could be used against you in some way or other?

Funnily enough Scraggy did an example of this using this exact figure. The thread is here.

http://forums.contractoruk.com/accou...rest-loan.html

We went in to loans in some details in a few threads and it wasn't straight forward I believe. Looking for the thread now.

[Clare@InTouch]

That 4% interest sounds low- could I for example take a directors loan of say £40,000 and for the subsequest years pay the 4% interest until I repay it?

And if I could do the above, is it one of those grey areas where you can do it but it is a bit dodgy and could be used against you in some way or other?

The 4% interest will stop it being a benefit in kind, but it won't stop the Section 455 charge. Any loan outstanding at the year end and not repaid within 9 months will result in extra CT equal to 25% of the loan balance. Conveniently, that's the same tax liability as if you'd taken a higher rate dividend (S455 being paid by the company and dividend tax being paid by you).

The extra CT is however repaid to you 9 months after the year end in which you repay the loan.

[Craig@Clarity]

For anyone who needs a link, the 4% is taken from HMRC's website here: HM Revenue & Customs: Beneficial loan arrangements - official rates

[blinko]

Can I what the advantages are of taking a loan from the company if any ? thanks

[northernladuk]

Can I what the advantages are of taking a loan from the company if any ? thanks

I am afraid not sorry. It is against the rules.

[NLUKbot]

Can I what the advantages are of taking a loan from the company if any ? thanks

NLUKbot recommends searching for *BENEFITS OF DIRECTORS LOAN*

NLUKbot search results

[Joeman]

Wow. That sounds like an open invitation for some people to shaft themselves royally. Enough people manage to do it when it is illegal let alone when it is allowable.Didn't know that. Thanks.

yep, i could imagine a newbie contractor on a three month gig, taking his entire first months gross income as a loan, blowing the lot on beer and hookers, then not getting a renewal.... what a mess that would lead to...

[northernladuk]

yep, i could imagine a newbie contractor on a three month gig, taking his entire first months gross income as a loan, blowing the lot on beer and hookers, then not getting a renewal.... what a mess that would lead to...

Indeed.