I've got one of those questions where I thought I knew the answer but I've seen something that is making me question myself, so I though I'd see what other people think.
If a director takes out a personal loan and pays all of the funds from the loan into the company, then the repayments for the loan come from the company's bank account, how should that be accounted for?
I would have thought that since the loan is in the name of the directors, the interest can't be allowed as a business expense (although directors can charge interest on loans they make to their companies, but if they do then the interest is subject to income tax and needs to be declared quarterly to HMRC). Or shoud the interest on the loan be allowed? What about other borrowing, such as HP or credit card debt, is that any different?
Thanks for that, it confirms the treatment from the director's point of view.
What I'd also like to clarify is how to treat the loan in the company's accounts, am I right in thinking that whilst I can pass entries for the interest as well as the capital, a form CT61 needs to be submitted every quarter? The situation is that this hasn't been done historically, yet the personal loan repayments have been coming out of the company bank account.
