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Where Taxpayers and Advisers Meet

Drawing money from Ltd company as interest

RMC
Posts: 429
Joined: Wed Aug 06, 2008 3:35 pm

Drawing money from Ltd company as interest

Postby RMC » Fri Oct 19, 2018 4:30 pm

H&W company’s DLA was almost £100,000 in credit. They wish to benefit from the savings allowance and receive interest on the loan. The loan is not really needed – money is parked in the company bank account. What interest rate can they pay without fear that HMRC re-classify it as earnings? Interest rates on unsecured loans (they rent their home) are quite high, but if you put money into a savings account you get very little.

BTW what are the penalties on late submission of CT61 and late payment of tax?

Tom7000
Posts: 68
Joined: Wed Aug 06, 2008 3:30 pm

Re: Drawing money from Ltd company as interest

Postby Tom7000 » Wed Jan 09, 2019 5:53 pm

Nothing. The funds are surplus to requirements so are not needed and it will be seen as simple tax avoidance. IF only you could do this :) :) :)

CT fines etc -easy - google it

bd6759
Posts: 2964
Joined: Sat Feb 01, 2014 3:26 pm

Re: Drawing money from Ltd company as interest

Postby bd6759 » Wed Jan 09, 2019 6:59 pm

Nothing. The funds are surplus to requirements so are not needed and it will be seen as simple tax avoidance. IF only you could do this :) :) :)
Can you quote any statute to support that?

AdamS93
Posts: 195
Joined: Tue Sep 26, 2017 6:28 pm

Re: Drawing money from Ltd company as interest

Postby AdamS93 » Thu Jan 10, 2019 9:05 am

You have to use an interest rate that reflects the actual market rate taking in to account risk.

On the basis the company is very cash rich, and could effectively repay the loan on demand, I wouldn’t suggest an interest rate that is too high!

With a £100k loan, you’re not going to need a massively high interest rate to make use of the savings allowance.

As for the CT61, they only have to be filed when interest is physically paid (or credited to the DLA).

The fact that the loan isn’t used for trading purposes, this will be dealt with on the CT600.


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