Lend money to your company and get Interest 2


Many directors lend money to their businesses, especially during the start up phase.

But did you know the company can pay you interest net of 20% – the tax deducted at source is reported and paid each quarter using form CT61

Form CT61 cannot be downloaded or ordered online. To order a form, you need to phone the HMRC Accounts Office Shipley on Tel 01274 539 665.

Here is a link to the HMRC notes on Form CT61 http://www.hmrc.gov.uk/ctsa/ct61-notes-2010.pdf

If the loan is from a family member and they are a non taxpayer they won’t be able to use form R85 but they will still be able to claim the tax back either by contacting HMRC 0845 366 7850 or by filing a self assessment return

Interest payments are not subject to National Insurance and can be a tax efficient of recieving part of your income from your business.

The income will need to be reported on your self assessment return.

The interest charges will be tax deductable by the Company.

You may also consider registering your loan with Companies House as a Debenture, here is a link to help you register your charge http://www.companieshouse.gov.uk/infoAndGuide/faq/companyCM.shtml

This will make the you ‘the lender’ a secured creditor but you may have to take a secondary position behind your bank or other lenders or if other lenders are already lending you may need their permission to register a charge.

steve@bicknells.net

 

2 comments

  1. Hi Steve,
    This is a great idea. We’ve done this with several clients. One of the other main reasons for doing it is that if anything goes wrong with the company, it will allow the director more control to appoint an insolvency practitioner of his own choice rather than have one imposed by the bank. This can often give a better personal outcome.
    Regards
    Steve

  2. Pingback: Have you filed your 2012 Self Assessment Tax Return? « Steve J Bicknell

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