Loans from directors and shareholders

Produced by a Tolley Corporation Tax expert

Corporation Tax

Guidance

This guidance note provides an overview of the tax implications to consider when loans are made to companies by their shareholders and directors and provides links to other guidance notes setting out more detail on the various rules.

‘Late interest’ rules

If a close company is charged interest on a loan from a participator (or an associated person), a set of anti-avoidance provisions known as the 'late interest' rules may apply. This means that if the interest on the loan is accrued but not paid over within 12 months following the year end, it is only allowable for corporation tax purposes when it actually paid, rather than when it is accrued. For more information, see the Connected party relationships - late interest guidance note.

Withholding tax requirement

In addition there may be an obligation to withhold tax at source. If this is the case the company will have to deduct tax at the basic rate of income tax (currently

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