Director taking a loan from a limited company


Postby DutchF on Fri Jan 18, 2008 7:03 am

Hello there, hope you help.

I am director of a small limited company with cash in the bank. Can I take out a loan from my company (in the order of 3 or 4k) and pay that back over, say 2 years (interest free).

Would that cause problems?

many thanks,

Francis
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Postby robbob on Fri Jan 18, 2008 7:24 am

I am not a great fan of directors taking loans from the company. It shows up on your accounts and must be a nice pointer when the tax man is looking for companies to investigate.

If you want to take a loan up to 5k there is no need to report this on the P11D as there is a dispensation up to this level.Just make sure that this loan is not on top of an already overdarwn directors loan.
However as far CT600 is concerned any loan must be reported at the year end and if the amount is not repaid back within 9 months then a 25% tax charge is applied.This will only be repaid once the loan is cleared and the relevant repayment date is reached.
For what you would pay in interest for a personal loan from your bank this my be a less hassle free route.
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Postby wamstax on Fri Jan 18, 2008 8:35 am

There is nothing illegal nowadays about taking a loan from your company however check with your accountant first if you have any money in your director's loan account that can be taken out without any tax ramifications and if so you don't need to take a loan from the company.

Equally if you can wait until the first day of an accounting period before you take the money out you could effectively have the loan of the money and pay it back within 21 months and neither yourself or the company would have to pay any extra taxes. However you would have to be sure that you minuted everythign and dealt with it at exactly the right time.

If you haven't got a tax advisor then I suggest that you get one on board as they will save you money as long as you consult them before carrying out any particular and material transactions

regards and hope this helps
bill@wamstaxltd.com
http://www.wamstaxltd.com
regards and hope this helps
bill@wamstaxltd.com
http://www.wamstaxltd.com
Operates Nationally with competitive costs
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Postby wamstax on Fri Jan 18, 2008 8:42 am

Hi robbob,
I note your comments but personally view that a loan to a director (as long as it is properly shown on the accounts and tax accounted for correctly) should neither be a plus or minus for HMRC enquiry. With an open mind it can show that at least the director has correctly recorded his borrowings from the company and hasn't succumbed to putting it down in a naughty and tax evasive way. I would venture to say that HMRC are maybe just as likely (if not more so) to get a result from a case without a loan appearing on the balance sheet as they are with one correctly shown.
regards
bill@wamstaxltd.com
regards and hope this helps
bill@wamstaxltd.com
http://www.wamstaxltd.com
Operates Nationally with competitive costs
wamstax
 
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Postby paul_dgw on Mon Jan 21, 2008 6:52 am

if your company turns a profit and you dont already take a dividend...depending on you overall income... payment of didvidends may be a more tax efficient way of withdrawing money from the company. a chat with your accountant should determine your best option
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