Can I charge my Ltd interest?

[Olly]

Ok so I took a directors loan which I paid about 400 quid interest. During the course of the loan I've offset and expenses/salary owed by my Ltd. This was okayed by my accountants.

Nooooooooowwwwww......

Is the reverse true. I have not had a directors load for about a year and most of that time my Ltd owes money. Can't I charge it interest at the same HMRC rates given for directors loans.

I'd soon get my 400 quid back!
Thanks

[northernladuk]

Wouldn't this interest be classed as profit and therfore taxable or because the money is not the companies you can pocket it tax free?

If this interest is in your account you will get it back eventually i.e. when you close the account. Is it worth so much to you to start raising some odd signals to Hector in an effort to get a few hundred quid back early?

[Olly]

Wouldn't this interest be classed as profit and therfore taxable or because the money is not the companies you can pocket it tax free?

I'd have to declare it and pay income tax on it if applicable.

If this interest is in your account you will get it back eventually

Well no, because Cater Allen give bugger all interest and HMRC rate is quite high 4.75% IIRC

As fair as raising eyebrows, of course I wouldn't like the stress of them investigating me but have nothing to hide. If it's legal why not take it, beer money is beer money in my book.

[xoggoth]

I believe you can charge a commercial rate but as said it would be taxable. Depends on your income and where you invest it as to whether it's worth it.

[Olly]

Well we're talking about money that's already been loaned.
"commercial rate" is presumably the HMRC rate for director's loans?
If I charge it then I get a 21% corporation tax saving on the 4.75%
Of course that would lower my dividend in order to stay under 40% threshold and just mean 21% more retained profit in Ltd "from" the interest.
Hm..average loan 4K over 8 months (we're all square now)
(4.75 / 12) * 8 = 3.16%
so £126 interest in the period
and a massive total £26.46 corporation tax saved.

Erm....well it was a nice idea
Think I better get a job and earn £26.26 rather than work out intricate daily expense delta calculations.

[jetrimby]

If able to make dividend withdrawals without problems I would stick with this and not warry about the interest. If a larger sum of money can be worth doing BUT when paid the company has to fill in forms and deduct basic rate tax at source and pay it over to Revenue (just like your bank/building soc does). Can be a lot of hassle for a small saving in tax.

As for rate if doing it remember you have made an unsecured loan to a limited company the rate could easily be 15% or more (you try get a similar loan from a bank!) When I have done it for clients I have tended to use 10% as a good but not greedy rate... \normally only done where shareholders are different from lenders