A director’s loan must be repaid within nine months and one day of the company’s year-end, or you will face a heavy tax penalty. Any unpaid balance at that time will be subject to a 32.5 per cent corporation tax charge (known as S455 tax). Fortunately, you can claim this tax back once the loan is fully repaid – however, this can be a lengthy process.
If you have taken longer than nine months and one day to repay your director’s loan and have been charged corporation tax on the unpaid amount, you can claim this tax back nine months after the end of the accounting period in which you cleared the debt. This is a long time to wait and the process can be onerous, so it’s best to ensure you don’t end up in this position.
One possible workaround is to put off paying your company’s corporation tax until your director’s loan is repaid. Your corporation tax payment deadline is nine months after your financial year end, which can give you extra time to repay the loan.
Can I repay a director’s loan and then take out another one?
You have to wait a minimum of 30 days between repaying one loan and taking out another. Some directors try to avoid the corporation tax penalties of late repayment by paying off one loan just before the nine-month deadline, only to take out a new one. …