Profit extraction: how flexible are directors’ loans in terms of tax liability?

Stephen Relf CTA ACA examines potential tax pitfalls for owner managed businesses when they use directors’ loans instead of conventional salary structures, from outstanding loans to repayment terms

It is common in an owner-managed business situation for the company to make a loan to a director/shareholder. This can take a number of forms, from a formal loan with interest and repayment terms set out in writing to an overdrawn current account with the company. There are tax implications at each stage of the loan, including when the loan is made, while the loan is outstanding and when the loan is repaid or written off.

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