Any money taken out of a company by a director, where it is not paid out as salary, dividends or expenses, constitutes a director's loan.
Records must be kept for any money borrowed from a company (or lent to a company) - this is known as a 'director's loan account'. At the end of the financial year, any money owed to the company (or vice versa) must be included in the balance sheet as part of the annual accounts.
Tax may need to be paid on a director's loan, in the form of:
- Corporation tax- if the loan is over £10,000 and is not repaid within 9 months of the end of the relevant Corporation Tax accounting period.
- Personal tax - if the director's loan is over £10,000. Also if interest has been paid below the official rate, further tax may be due.