Within the formal accounts for a company there will be a Director’s Loan Account (DLA) for each director. Note that these are for directors and not shareholders.
The director’s loan account is where all of the money you either borrow from your company, or lend to it is recorded.
A director can lend money to their company. This can be for many different reasons which could include:
- To aid cash flow
- To fund acquisitions
- To buy assets
- To invest in property
The ability to fund the deposit for a buy to let investment and then have your deposit paid back ‘tax-free’ is one advantage of investing in property through an SPV Company.
While the loan is outstanding, you have the option to ‘charge’ your company interest on the loan balance. These interest payment will be treated as income for yourself.
Your company can repay the loan in any way that suits you. So this could be a set amount each month, a single sum each year or the whole balance paid in one go. These repayments will not be treated as your income as you are merely getting your own money back.
It would also be possible for you to borrow money from the company via your directors loan account.
It’s a good idea to discuss use of the DLA with your accountants before you actually use it!
