Directors Loan Account

[minnehoma]

If I have a balance against my Directors loan account, can I be forced to pay this back?

I understand that this loan will need to be paid back at some point but is reasonable for the company to demand it when they want it?

 

[fisicx]

What does it say in the articles, loan agreement, meeting minutes and wherever else the loan is documented?

 

[Newchodge]

Are you still a Director? who is asking for it back? 'The company' has no voice, is it another Director, shareholder, who?

 

[Lisa Thomas]

I recently had directors claim that their overdrawn DLA couldn't be repayable yet as they couldn't afford it, yet the signed, filed accounts clearly stated the loan was repayable on demand... How much do you owe? Have you stoopped drawing a DLA from the company or is it continuing to grow?

 

[WaveJumper]

I would say it's pretty common in a company to have "payment on demand written in" but like others before me this is going to be all about the paperwork. Are you part of a larger ltd or is this solely you might help us to understand it a little better

 

[StrategyDoctor]

You may also need to consider HMRC (see the links below), I am not an expert but one of my clients had a similar situation recently. You should talk to your accountant for professional advice if you are unsure.

Many sets of accounts explicitly state the director’s loan is “repayable on demand” (in which case, yes — the company (i.e. the board) can require repayment).

Director's loans

Your and your company's responsibilities - repaying director's loans, interest, tax on loans, reporting to HM Revenue and Customs.

www.gov.uk

Director's loans

Your and your company's responsibilities - repaying director's loans, interest, tax on loans, reporting to HM Revenue and Customs.

www.gov.uk

The company should have an agreement with you on the mechanism for repaying back any loan. However, in my experience with small companies this can often be informal and the pressure comes for immediate payment when cash gets tight. If you are unsure check the articles, any director/shareholder loan agreement, board minutes, etc.

The HMRC angle - even if the company or other directors are not asking for repayment timing, there are HMRC consequences if it stays overdrawn, some things to check with your accountant:

• If it’s not repaid within 9 months and 1 day after HMRC can impose a levy (33.75% of loan value?) on GOV.UK for loans made after 6 April 2022). Once the loan is settled I understand the levy is paid back?
• 
  
• If the loan is over £10,000 at any point, it’s usually treated as a benefit in kind and there can be personal tax / employer NIC implications.
• 
  
• If the company charges interest below HMRC’s official rate, the “discount” can also create a benefit in kind.

If this is a concern for you, a quick email or call to your accountant and they should easily guide you through your specific situation and timings.