Director's loans

2. If you owe your company money

You or your company may have to pay tax if you take a director’s loan.

Your personal and company tax responsibilities depend on how the loan is settled. You also need to check if you have extra tax responsibilities if:

  • the loan was more than £10,000 (£5,000 in 2013-14)
  • you paid your company interest on the loan below the official rate
How the loan is settled Your company’s responsibilities if you’re a shareholder and director Your personal responsibilities when you get a director’s loan
You repay the loan within 9 months of the end of your Corporation Tax accounting period Use form CT600A when you prepare your Company Tax Return to show the amount owed at the end of the accounting period.

If the loan was more than £5,000 and you took another loan of £5,000 or more up to 30 days before or after you repaid it, pay 25% of the original loan as Corporation Tax. After you permanently repay the original loan, you can reclaim the Corporation Tax - but not interest.

If the loan was more than £15,000 and you arranged another loan when you repaid it, pay 25% of the original loan as Corporation Tax. After you permanently repay the original loan, you can reclaim the Corporation Tax - but not interest.
No responsibilities
You don’t repay the loan within 9 months of the end of your Corporation Tax accounting period Use form CT600A when you prepare your Company Tax Return to show the amount owed at the end of the accounting period.

Pay 25% of the outstanding amount as Corporation Tax.

Interest on this Corporation Tax will be added until the Corporation Tax is paid or the loan is repaid.

You can reclaim the Corporation Tax - but not interest.
No responsibilities
The loan is ‘written off’ or ‘released’ (not repaid) Deduct Class 1 National Insurance through the company’s payroll. Pay Income Tax on the loan through your Self Assessment tax return

If the loan was more than £10,000 (£5,000 in 2013-14)

If you’re a shareholder and director and you owe your company more than £10,000 (£5,000 in 2013 to 2014) at any time in the year, your company must:

You must report the loan on your personal Self Assessment tax return. You may have to pay tax on the loan at the official rate of interest.

If you paid interest below the official rate

If you’re a shareholder and director, your company must:

  • record interest you pay below the official rate as company income
  • treat the discounted interest as a ‘benefit in kind

You must report the interest on your personal Self Assessment tax return. You may have to pay tax on the difference between the official rate and the rate you paid.

Reclaim Corporation Tax

Your company can reclaim the Corporation Tax it pays on a director’s loan that’s been repaid, written off or released. You can’t reclaim any interest paid on the Corporation Tax.

Claim after the relief is due - this is 9 months and 1 day after the end of the Corporation Tax accounting period when the loan was repaid, written off or released. You won’t be repaid before this.

You must claim within 4 years (or 6 years if the loan was repaid on or before 31 March 2010).

Reclaiming within 2 years

If you’re reclaiming within 2 years of the end of the accounting period when the loan was taken out, use form CT600A to claim when you prepare a Company Tax Return for that accounting period or amend it online.

Use form L2P with your Company Tax Return instead if either:

  • your tax return is for a different accounting period than the one when the loan was taken out
  • you’re amending your tax return in writing

Tell HMRC how you want the repayment in your Company Tax Return.

Reclaiming after 2 years

If you’re reclaiming 2 years or more after the end of the accounting period when the loan was taken out, fill in form L2P and either include it with your latest Company Tax Return or post it separately.

HMRC will repay your company by either:

  • using the details you gave in your latest Company Tax Return
  • sending a cheque to your company’s registered office address