Given a choice, it’s safer for a company to borrow money than its shareholders.
Inland Revenue has argued, successfully, that interest paid on money borrowed by shareholders for their company is not a tax deductible cost for the company. This is because the company didn’t borrow the money.
Many companies have been caught out by this and had the unpleasant surprise of discovering interest had not been a tax deductible cost for some years. Inland Revenue has disallowed the expense, increased the taxable income and collected extra tax, together with a hefty Use of Money Interest charge.
It’s easy for an accountant not to notice the money has been borrowed by the wrong people.
So you’ve been warned. If your company needs to borrow money, make sure it’s indeed the company that does the borrowing.
If you find a loan is in your name, you can still do something about it.
In both cases the paperwork matters. Get professional help and get it right.