HMRC clarifies tax refunds on directors loans

HMRC clarifies tax refunds on directors loans

Nov 9, 2023

HMRC has updated guidance on how close companies can reclaim tax on directors loans

Close companies can make loans to directors but the funds must be paid in full within nine months of the accounting period.

A director’s loan is defined as when a director or other close family members borrow money from a company that is not a salary, dividend or expense repayment, or money previously paid into or loaned to the company.

Tax relief is available if the loan has been repaid or written off but cannot be claimed until nine months and one day after the corporation tax accounting period.

To claim the tax relief a unique taxpayer reference (UTR) number is required and bank or building society details. HMRC also needs the loan details, including the start and end date of the relevant accounting period.

Any accountants dealing with clients holding director’s loans should make sure they are registered to use an agent services account.