21 March 2007
I have a client whose business was incorporated on 1 February 2003. There was a shortfall of assets to liabilities on incorporation and this was duly debited to a director's loan account.
To avoid a benefit in kind charge, interest at the official rate has been debited to this director's loan account on a monthly basis and has accordingly been included in the company's accounts on which it has paid corporation tax.
No written agreement exists, but the interest has always been shown clearly in the company's accounts, which have been ratified by the company at its AGM.
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