Personal tax on loan interest. Can I pay gross?

[craigy1874]

I think you can do CT61 annually but that is what we do on the DLA accounts. It is then claimed back via your friends SATR.

Our accountants said a loan was a commercial decision and felt up to 10% justifiable on a DLA balance but I would say the company should have a need for the loan to be able to justify it or at least be making good use of the money.

Don't think you can file CT61's annually.

[MB2]

I think you can do CT61 annually but that is what we do on the DLA accounts. It is then claimed back via your friends SATR.

Our accountants said a loan was a commercial decision and felt up to 10% justifiable on a DLA balance but I would say the company should have a need for the loan to be able to justify it or at least be making good use of the money.

[craigy1874]

You also need to complete and submit CT61 forms on a quarterly basis.

All in all, it probably isn't worth all of the hassle for the small amount of interest you will pay.

[Whorty]

I like the fact that the interest to be paid as a % is nearly the same as bank interest, yet comes out to exactly £11,000 to keep the lender below any tax threshold. Assuming a % rate of 7.5% this would be a loan of about £150k ..... would love to know what his LTD is looking to invest that money into!

[northernladuk]

Unless of course your company doesn't really need a loan and this is just a complex tax avoidance scheme you've dreamt up. If this is the case then you will need a lawyer.
.

Looking at his posting history this would seem to be the reason. Problem is to carry out a complex and arguably dodgy tax avoidance/evasion you've got to be smart. OPs history isn't looking great on that front TBH.

[Lance]

My ltd needs a loan. With a couple of months left on the contract and nothing coming banks are not interested.
A friend can give me a loan at almost same interest rates as a bank.

I see that the interest payment to him is an expense for the business. However the gov website states I have to deduct personal tax for him before paying the interest to him.
He doesn't have any income and the total interest will be less than 11000 per year.

Even if it wasn't so how am I supposed to know what is his total income to withhold the right tax %?

Can I pay him the interest gross and he to sort tax via SATR?

Taking the question at face value, it would make more sense for your 'friend' to loan the money to you personally, and you then credit (or is it debit? that bit always blows my mind) that to your director loan account. Your LTD pays you back personally (no tax) and then you pay your 'friend'.
That way your 'friend's' tax issues aren't your problem (unless you're doing something dodgy).

Unless of course your company doesn't really need a loan and this is just a complex tax avoidance scheme you've dreamt up. If this is the case then you will need a lawyer.

If this is a genuine question for genuine reasons (hahahaha), and he actually does want to loan the money to your LTD, then I imagine that the solicitor's fees for drawing up a loan agreement will far outweigh the sensible alternative; where you borrow the cash personally, from a bank, and put the money into the company.

NOTE: If your friend doesn't think you need a loan agreement then go back to my first suggestion (and I suggest you explain what limited liability actually means as well).

[GhostofTarbera]

Is this a friend with benefits ?

[WTFH]

Is this related to employing your “retired relative” thread?

[WTFH]

Why does your LTD need a loan out of interest?

Maybe the question would be: Are you trying to give your “friend” some money tax free from your company and think this is a good way of doing it?

[northernladuk]

Why does your LTD need a loan out of interest?

[mudskipper]

You deduct 20%, pay it to HMRC on his behalf, and your friend will sort out the balance via his SATR. At least, that's what the housekeeper thinks.

FTFY.


OP, it does sound complicated if no tax is going to be due. Does your accountant have a view? If not, on this one it might be worth contacting HMRC for advice - the banks used to have a form that the saver with low income could fill in authorising them to pay gross, perhaps something similar could apply?

[PhiltheGreek]

You deduct 20% and your friend will sort out the balance via his SATR. At least, that's what the housekeeper thinks.

[pscont]

My ltd needs a loan. With a couple of months left on the contract and nothing coming banks are not interested.
A friend can give me a loan at almost same interest rates as a bank.

I see that the interest payment to him is an expense for the business. However the gov website states I have to deduct personal tax for him before paying the interest to him.
He doesn't have any income and the total interest will be less than 11000 per year.

Even if it wasn't so how am I supposed to know what is his total income to withhold the right tax %?

Can I pay him the interest gross and he to sort tax via SATR?