Loan from Company to director

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mmc71 replied

23 February 2006, 10:08
Ok, here is the answer from my accountant....

You would need to pay interest at or exceeding the Revenue rate of 5%. The company would have a s419 charge of 25% of any part of the loan
still outstanding 9 months after the end of an accounting period. This
latter charge is clawed back as the loan is repaid and the balance
outstanding reduces, but should be borne in mind as it would have a big
impact upon cash flow I imagine.
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VectraMan replied

22 February 2006, 14:59
I thought there was a £5K limit on Director's loans, and you had to pay it back by the time the coroporation tax is due? Surely if you start lending yourself large amounts of money and charging interest, you're into the realms of needing to be licenced and obeying lending regulations.

But it's one for professional advice.
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expat replied

22 February 2006, 14:46
Originally posted by malvolio

Briefly, yes - provided you pay commercial interest rates. If you don't, it becomes a benefit in kind and you get taxed on it. However, speak to a professional about this, there are potential problems if you get it wrong.

Commercial mortgage interest rates? That would save the need for a self-cert mortgage!
And is the amount loaned therefore (in the meantime) neither salary nor dividends nor retained profit, and therefore not taxed yet? (Obviously it will be when it's repaid and then presumably disbursed).
Leave a comment:
malvolio replied

22 February 2006, 14:20
Briefly, yes - provided you pay commercial interest rates. If you don't, it becomes a benefit in kind and you get taxed on it. However, speak to a professional about this, there are potential problems if you get it wrong.
Leave a comment:
mmc71 started a topic Loan from Company to director

22 February 2006, 14:14
Loan from Company to director

Hi, I'm due to pay the final installment on a foreign property in May and i'm in need of a mortgage or circa 50k.

Now rather than get a mortgage from a bank, can my own ltd company make this money available to me as a loan/mortgage? If so i assume i will have to pay interest on the loan (only fair i guess), but at what rate? Can i make it equal to the lowest available mortgage rate on the market?

Are there any drawbacks or other tax considerations that i need to consider?

(Property law in the country i bought in, prevents my UK ltd company from directly owning the property, so the property has to remain in my name).
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