A Loan From Your Own Company

Newsletter issue - July 07.

If you want to borrow some funds temporarily from your own company, there is not much in practice that will prevent you from doing this.

However, company law prohibits a company of any size from making loans to its directors, unless those funds are needed by the director to pay expenses incurred on behalf of the company, or to allow the director to perform his duties as a director. The loan must also be approved by the shareholders in a general meeting and be repaid within six months of that meeting. There is a general exemption from these conditions where the amount of the loan does not exceed £5,000.

So you can borrow up to £5,000, but you also need to think about the tax consequences however much you actually borrow. If you do not repay the loan within nine months of the company's year end, the company will have to pay an extra corporation tax charge equivalent to 25% of the loan. That charge will be set-off against the next corporation tax payment due after you finally repay the loan.

When you borrow more than £5,000 there will also be a benefit in kind tax charge due from you personally, if you do not pay interest on the loan of at least 6.25%. This tax charge applies however long you borrow the funds for: 5 months or 5 years.

What our clients say about us...

  • "Paul has provided accountancy services to my company for 2 years now. I can recommend Paul very highly; his skills as an accountant are highly detailed and professional and he is always available to provide advice. One aspect of the way Paul works that I greatly appreciate is a preference to meet face to face when there is a detailed conversation to be had. I personally find this more productive and is a benefit of working with a small accountancy firm that you wouldn't get with the large faceless providers."

    ALISTAIR FAIRWEATHER - PROGRAMME & PROJECT MANAGER, DELIVERING/RESCUING I.T. 7 BUSINESS CHANGE WITH BUDGETS UPTO £50M INC SUPPIER MANAGEMENT

  • "I couldn't ask for more from Paul as an Accountant. Paul has been accountant to Work Relief Charity Recruitment for just over a year now and is proving an invaluable asset. Accurate, knowledgeable, flexible with an emphasis on service delivery, I would recommend Paul's services to any organisation looking for an accounts professional."

    Neil Price - Managing Director at Work Relief Charity Recruitment

  • "Paul was a referral from a family member when I started my business 2 years ago. As this was the first time I had ever run my own company I was totally clueless over the financial side of matters and was worried that I may have made mistakes in any of my accounting. I needn't have worried as after enaging Paul for a set monthly fee he was always there on the end of the phone for all sorts of questions I had and no matter how trivial they were Paul gave me all the information I required and more and did an excellent and painless job at the end of my first year! Couldn't ask for any better to be honest. Just two words - hire him!!!"

    Lee Westrap MBCS - Director - Bulldog IT Services

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Booth & Co  |   The Hermitage  |   15a Shenfield Road  |   Brentwood  |   Essex  |   CM15 8AG        Telephone: 01277 224666    |   Email: info@boothandco.co.uk