What is a director’s loan?
Definition of director’s loan
A director’s loan must be recorded and included in the company’s annual accounts. This record is usually known as a ‘director’s loan account’.
It’s also possible for a director to lend money to the company, either by putting cash into the company’s bank account or by spending their own money on company costs. The company should also record this in a director’s loan account.
Director’s loan accounts
A director’s loan account is a list of all transactions that have occurred between a director and the company. At the end of the company’s accounting year, either the director or the company may be owed money by the other party. If this happens, it should be recorded as either an asset or a liability on the company’s balance sheet.
The company and the director may have to pay tax on director’s loans. These tax responsibilities can vary, depending on whether the director’s loan account is either: