Director Loan Paying Official Rate

Discussion in 'Accounts & Finance' started by LtdDirector, Nov 25, 2017.

  1. LtdDirector

    LtdDirector UKBF Newcomer Free Member

    3 0
    I have a question on director's loan if I take over 10K directors loan and pay official rate of interest on that i.e. 3% as per hmrc website.

    Do I have to report the director's loan to HMRC and subject to extra corp tax.

    And will the interest will be on the total amount or (total amount - 10K)
     
    Posted: Nov 25, 2017 By: LtdDirector Member since: Nov 25, 2017
    #1
  2. STDFR33

    STDFR33 UKBF Big Shot Free Member

    3,543 860
    Posted: Nov 25, 2017 By: STDFR33 Member since: Aug 7, 2016
    #2
  3. LtdDirector

    LtdDirector UKBF Newcomer Free Member

    3 0
    I wonder you know the answer to my question, your response is first result on google as well.
     
    Posted: Nov 25, 2017 By: LtdDirector Member since: Nov 25, 2017
    #3
  4. Scalloway

    Scalloway UKBF Legend Free Member

    13,917 2,970
    You will note that no mention is made of not reporting the loan if interest is being paid. I would take that to mean Corporation Tax is payable regardless.
     
    Posted: Nov 25, 2017 By: Scalloway Member since: Jun 6, 2010
    #4
  5. LtdDirector

    LtdDirector UKBF Newcomer Free Member

    3 0
    Thanks Scalloway; Doesn't that mean you need not to pay interest if you are going to pay extra corp tax anyways.

    I wonder if any one know definite answer,
     
    Posted: Nov 25, 2017 By: LtdDirector Member since: Nov 25, 2017
    #5
  6. Mr D

    Mr D UKBF Legend Free Member

    10,042 1,053
    HMRC will. Getting them to give it you is another matter..
     
    Posted: Nov 25, 2017 By: Mr D Member since: Feb 12, 2017
    #6
  7. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

    879 184
    You will need to pay interest on the loan as it’s over £10k.

    If it is not repaid within nine months of your company year end you’ll have to pay s455 corporation tax on the outstanding balance. You’ll get this back eventually once the loan is repaid.
     
    Posted: Nov 25, 2017 By: TheCyclingProgrammer Member since: Jul 15, 2014
    #7
  8. CaMaNo

    CaMaNo UKBF Contributor Free Member

    40 6
    Correct me if I am wrong but you may be confusing benefit in kind and corporation tax on loan to participator (s455 Tax)
    I am assuming you are shareholder and Director.
    When a director's loan is in credit and under 10 k no benefit in kind arises. If over 10 k at anytime in the tax year (6 April to 5 April next year) a BIK arises and is calculated at 3% of the average amount. If you have been repaying this amount as interests to your company then no BIK arises.

    A separate issue arises if at the company's year end the loan is outstanding. There is no minimum amount. The amount outstanding is taxed as extra corporation tax at a rate of 32.5% unless repaid within 9 months of the year end. If this s455 tax is payable it can be reclaimed when the loan is repaid. The payment of 3% interests has no impact on this s455 tax.

    I hope this helps.


    Édit: sorry my comment was made in answer to the OP I was a bit slow typing my answer!
     
    Posted: Nov 25, 2017 By: CaMaNo Member since: Oct 18, 2017
    #8
  9. UK Contractor Accountant

    UK Contractor Accountant UKBF Big Shot Full Member - Verified Business

    4,303 723
    yes needs to go on CT600A together date of repayment if repaid.

    Also needs to go on P11D for beneficial loan interest with the amount of interest paid back shown in the appropriate section of the form.

    Holding Tax at 32.5% will need to be paid to HMRC if loan not repaid within 9 months of year end . There are also rules to counter the repayment of loan and then new loan taken out after the 9 month window.
     
    Posted: Nov 25, 2017 By: UK Contractor Accountant Member since: Sep 18, 2013
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  10. Argentum Tax

    Argentum Tax UKBF Contributor Free Member

    38 10
    Is the director also a shareholder and is the company a 'close company'. If not that will change the advice already given.
     
    Posted: Nov 27, 2017 By: Argentum Tax Member since: Aug 24, 2015
    #10
  11. CaMaNo

    CaMaNo UKBF Contributor Free Member

    40 6
    Agreed, this why I stated my assumptions in my response to the OP.
     
    Posted: Nov 27, 2017 By: CaMaNo Member since: Oct 18, 2017
    #11
  12. AliDem

    AliDem UKBF Newcomer Free Member

    14 0
    Hi All, just following up on this question:

    If you're shareholder/director of a close company and if you withdraw a loan more than £10K+:
    if you pay hmrc interest, then no BIK is required, but you still need to report in P11D and CT600A
    if you pay the loan back within 9 months of the year end, no S445 tax is paid

    Just making sure I understand this clearly.

    Best
     
    Posted: Aug 12, 2018 By: AliDem Member since: May 22, 2015
    #12
  13. TheCyclingProgrammer

    TheCyclingProgrammer UKBF Regular Free Member

    879 184
    You don’t pay HMRC the interest. The borrower pays YourCo interest.
     
    Posted: Aug 13, 2018 By: TheCyclingProgrammer Member since: Jul 15, 2014
    #13
  14. AliDem

    AliDem UKBF Newcomer Free Member

    14 0
    Oh yes, thank you! I meant hmrc interest rate. my fingers sometimes don't listen to me..=)

    So the rest sounds good then?
     
    Posted: Aug 13, 2018 By: AliDem Member since: May 22, 2015
    #14