Related parties loan

AndreaMc

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.

RyanMIP

1) Yes. Unless it’s an interest free loan.

2) No. You use the rate agreed between the parties.

AndreaMc

Hi Ryan
thank you for your help, it is an interest free loan.

RyanMIP

...in which case there’s no interest to calculate.