In brief
If you owe your company money at its year end and do not repay it within 9 months, the company must pay s455 tax on the balance.
If that tax is paid late, HMRC charges interest. If the return is wrong as well, for example by stating the loan was repaid when it was not, HMRC can also charge a penalty of up to 100% of the tax.
Reporting the loan correctly matters more than anything else. In our worked example, an accurate return costs about £4,300 in interest. The same facts with an incorrect return could cost over £42,000.
If you think a return may be wrong, talk to us on 01904 691141 or at reception@gravitax.co.uk before HMRC contacts you. Telling HMRC first significantly reduces penalties. Download the full guide above for the worked example.