Introduction To Director Loan account




If you are the director or participator of a Limited Company and you withdraw money from the company without registering it as a dividend or salary, you have technically received the money as a director's loan. This money is not yours and belongs to the company.

This guide sets out in detail how director's loans work and explains the Corporation and Income tax implications for you and your company. It also explains how you should record the details of any director's loans you have taken and what you need to do to inform HM Revenue and Customs of your Limited Company's Director's Loan Account.



The record of flows of money lent between a company director and the company itself is known as the Director's Loan Account. Money passed from the director to the company is classed as a credit on the account, while money passed from the company to the director which is not salary, dividends or expense reimbursement is classed as a debit.

The overall balance of transfers between the company and the director (ie the net position once all transfers in each direction have been accounted for) is the overall Director's Loan position. If the company bank account has received more money from the director than the director has received from the company (excluding salary and dividends) then the Director's Loan Account is in credit overall. If the company bank account has received less money from the director than the director has received from the company, the Director's Loan Account is in debit – or overdrawn.

If the account has a net balance of zero, there are no implications for your Tax Return, but debit balance (overdrawn director’s loan account) may have tax implications. Note that because it is simply an assessment of the balance of flows between the director and the company, the Director’s Loan Account exists whether or not you have specifically set one up in the company's books.

HM Revenue and Customs may ask to review your company's Director’s Loan Account to check that you are paying the correct Corporation Tax. This means you must keep a careful and timely record of all transfers between your company and its director(s). If your company has more than one director who takes, or makes, director’s loans, you must keep a separate record of each director’s transfers so that a Director’s Loan Account is available for each director of the company.


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