Since 1992, an agreement has been in place between the Association of British Insurers (‘ABI’) and the British Banking Association (‘BBA’) whereby a bank could notify its interest in relation to secured properties and the insurers would tell the bank of any cancellation or alteration in cover, with a grace period to allow the bank to arrange its own policy if the borrower had failed to maintain the required cover.
Last September the ABI announced that they were ending this agreement and that co-insured status either as Joint Insured or Composite Insured would be the only options open to Banks. These options are likely to increase insurance premiums.
Banking sources tell me that last week it was agreed that ABI would extend the agreement with BBA to December 2012, the BBA are yet to issue guidance and comment.
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.