Readers’ forum: Too good to be true?

I have a number of owner managed clients not within IR35 who have some savings on which they are earning negligible amounts of interest. I have been thinking about whether they can use their companies to achieve some tax efficiencies.

If they each lend money to their own companies then those companies could pay them interest on the loans. The interest would be tax deductible in the companies and as far as I can see would be within the personal savings allowance as far as their own tax is concerned. (There appears to be no rule restricting the use of the allowance where the interest is paid by a connected company.)

Of course this would not be worth doing unless a reasonable amount of interest was paid so is there anything to stop the companies paying interest at a high but not extortionate rate – say...