Loans to general managers

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General managers can borrow money from their enterprise. Certain formal conditions must be met in order for such a loan to be lawful.

A written loan agreement must be prepared. The loan must be treated as other liabilities in the enterprise’s balance sheet. Interest at market rates must be calculated and paid. It is also a condition that the general manager is able to repay the loan from the enterprise.

If these conditions are not met, the tax authorities can reclassify (change) the status of the payment from a loan to a salary payment, and tax it accordingly. In this case, employer's National Insurance contributions must be calculated and paid on the amount.

For loans to shareholders in the form of dividends, see the examples of form completion for shareholders’ loans.

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