A loan to a director of a company is deemed to be an annual payment made under the deduction of income tax.
The company is obliged in such circumstances to pay over income tax at a rate of 20/80ths of the outstanding loan at the end of the year to the Revenue Commissioners.
If the loan or part of the loan is repaid the company is entitled to reclaim the proportionate part of the tax originally paid over. A claim for repayment must be made within ten years. No interest is paid by the Revenue on these refunds.
If such a loan is written off and not repaid by the director the grossed up amount of the loan will be regarded as income of the Director. The amount written off will be taxed on the Director as a benefit in kind in the year in which the loan is written off and the tax paid over will cease to be recoverable by the company.
The contributions made by your company may be deducted from your company’s income in order to arrive at the taxable profits.
OSK Contracting provide quality and professional business advice to indigenous Irish businesses. Our clients include government bodies; multi-national groups; PLCs; SMEs and sole traders but we specialise in progressive indigenous Irish family owned businesses.
Reprinted with kind permission by OSK Contracting www.osk.ie
Phone: 01 439 4200 East Point Plaza East Point Dublin 3
