UK Liabilities for directors loan up to £10,000

[Peter SME]

Dear all,

first post to the forum - hope the topic is ok.

Suppose my corporate year is the same as calendar years. Suppose I take a director's loan of £10,000 after the start of one year (say 5/1/2017), and repay it before the end of the year plus 9 months (31/12/2017 + 9 months = 30/9/2018). What are the reporting requirements? What are the requirements in terms of interest or any other liabilities?

If there is interest/liabilities, then would these be the same if I
(1) repaid by the end of the corporate year (by 31/12/2017), or
(2) if I only borrowed £5,000?

Most examples seem to talk about liabilities beyond the "end of year + 9 months" period, or liabilities if you borrow more than £10,000. I haven't seen very clear statements what happens with you stay within the period and only up to £10,000. I've also seen some comments that things change if the loan is only £5,000, which suggests that there are certain liabilities if you borrow up to £10,000.

Any light that you can shed on this would be very much appreciated!
Peter

 

[Fidget]

Do you mean take a loan from the company you're a director for? If so, there's a statutory requirement under the Companies Act that anything outstanding at the year end is disclosed in the financial statements. In general, that's disclosure of the main provisions of the loan: How much, over what time period, at what interest rate, schedule of payments made to date, detail of anything else important - any freebie periods/waivers.

Outside of that, I don't think the actual amount has any particular conditions attached to it (that I'm aware of anyway) so would be the same whether it's £5k or £10k. It's more the accounting treatment that would change if the loan goes beyond the company reporting date because that would mean liability (for the director) of less than a year, plus liability after more than one year.

 

[Peter SME]

Many thanks for taking the time to respond! Yes, it's for a director's loan.

You said:
"If so, there's a statutory requirement under the Companies Act that anything outstanding at the year end is disclosed in the financial statements."

So is the converse of this true? I.e. "there is no statutory requirement to disclose anything that is not outstanding at the year end" ?

I'm obviously asking the question as I'm no export, but somehow that doesn't seem quite right - surely I cannot borrow £1bn, invest it somewhere temporarily, and then repay before the year end?

Unless of course you meant that the amount is not significant, as long as it's below £10k, which would make sense. (Clearly there must be some significance attached to the £10k figure.)

Do you have any further thoughts on this?

 

[Fidget]

There's a 10% rule attached, which is maybe why you're thinking £10k, The 10% rule is that a loan to a director can't exceed 10% of the value of the company's assets.