Home For accounting professionals General accounting discussion
Current updates regarding coronavirus (Covid-19) and the precautions AAT are taking will be continually updated on the below page.

Please check this link for the latest updates:
We hope you are all safe and well and if you need us we will be here. 💚


Related parties loan

AndreaMcAndreaMc MAAT, AAT Licensed Accountant Posts: 20
Hi All,
really need some help with related party loans. A client of mine is a director of 2 companies that are separate entities, the only similarity is the director/shareholder of the business. Lets call them company A & B. Company A regularly loans company B money throughout the year to cover costs during the slower months. This is normally paid back within a month or 2. however this year there is still an outstanding amount of 1500 that was loaned to company B, showing at year end that has been loaned for several months, but not longer than 12 months.The loan amounts between the 2 companies are usually around 500-1000, no more.

My questions are:
1. Do I need to work out the interest on this balance?
2. If so is there a general rate I can use?

I hope you can help me, TIA.

Comments

  • RyanMIPRyanMIP LincolnshireRegistered Posts: 50
    1) Yes. Unless it’s an interest free loan.

    2) No. You use the rate agreed between the parties.
    MarieNoelle
  • AndreaMcAndreaMc MAAT, AAT Licensed Accountant Posts: 20
    Hi Ryan
    thank you for your help, it is an interest free loan.
  • RyanMIPRyanMIP LincolnshireRegistered Posts: 50
    ...in which case there’s no interest to calculate.
Sign In or Register to comment.