Ask AMS: I’ve been told I have a Director’s Loan – what is it?

By Anita Jaynes on 1 October, 2019

AMS is a Swindon-based accountancy practice, specialising in supporting SMEs and contractors. In this column, Peter Bromiley, partner at AMS explains how a Director’s Loan works.

Many directors/shareholders borrow money from their companies but, as long as they repay it within 9 months of their following accounting year end date, there are no great tax implications.

If it is not repaid by that deadline, a law called s.455, says the company must pay 32.5% (from April 2016) of the outstanding loan to HMRC – who will hold this money until the loan has been repaid to their company in full.

What you cannot do is pay it back by the deadline and then re-borrow it soon afterwards unless the loan is under £15,000 where it could be re-borrowed after 30 days.

If you re-borrow more than £15,000, HMRC can make the decision that you always intended to re-borrow it later and apply the s.455 law as above. So, in practice you can borrow money from your company – but be aware of the rules.

Peter Bromiley ACA AMS Accountancy Ltd

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