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) orâ¯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
