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Directors Loan Accounts – what happens when you borrow money from your Company Account.

15th May 2018

Many director/shareholders borrow money from their Companies but, as long as they pay it back within 9 months of the following accounting year end date, there are no great tax implications.

If it is not paid back by that deadline, a law called s.455, says the Company must pay 32.5% of the outstanding loan to HMRC – who then hold this money until the loan has been repaid to the Company.

What you cannot do is pay it back by the deadline and then re-borrow it soon afterwards - unless it is a loan under £15,000 which can be re-borrowed if more than 30 days later.

HMRC could also treat loans over £15,000 as not repaid if they believe it was intended that the loan would be re-borrowed, once repaid. 

In practice you can borrow money from your Company – but be aware of the rules.