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DLA - A cheap source of finance?

Shared from Tax Insider: DLA - A cheap source of finance?
By Jennifer Adams, July 2022

Jennifer Adams investigates whether borrowing from a personal or family company could be an attractive source of cheap finance.  

HMRC has long tried to discourage director shareholders from borrowing money from their companies through a special tax, known as an s 455 charge. The reason being that HMRC considers the borrowing may be a technique to avoid either PAYE, NIC (payable if the 'loan' was paid as salary or bonus) or dividend tax. However, borrowing from your company could prove less costly than borrowing from a bank, so long as the rules are adhered to and the company is not in financial difficulty.  

Impact if loan not repaid 

A full-time working director with more than 5% interest in the company’s share capital and an overdrawn director’s loan account (DLA) as at the accounting year end is required to repay that amount before the company

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