How do I reclaim tax withheld by my company via a CT61?

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    How do I reclaim tax withheld by my company via a CT61?

    Here's the situation:
    • I am borrowing money in my own name, and re-lending it to my company.
    • My company pays me exactly the same interest rate as I personally pay to the bank, so I do not make any "profit" on the re-lending and therefore I should not incur any personal tax liability due to this arrangement.
    • However, my accountant said my company had to submit a CT61 and subject the interest payments to me to 20% withholding tax, but he also said that it'd be easy for me personally to reclaim the tax which was paid via self-assessment.
    The issue is that I cannot for the life of me find any way of personally reclaiming the withholding tax my company paid. Can anyone help? (I'll ask my accountant next week if not, of course, but I thought I might just be missing something obvious).

    #2
    I've just had another think, and was wondering if I'd missed something fundamental: do I simply put the net amount I received from my company as taxed interest income (on which I would theoretically be taxed a further 20% as my marginal tax rate is 40%), but then put the full amount of interest I personally paid as an "expense" somewhere on my self-assessment form, which'd cancel it out?

    Comment


      #3
      If you look at the CT61 guide, your company has to deduct 20% from the interest before paying you.

      https://www.gov.uk/government/upload...notes-2010.pdf

      So you should arrange your company to pay future interest direct to the bank and not to you and from you to bank.

      Comment


        #4
        Originally posted by Gordon999 View Post
        If you look at the CT61 guide, your company has to deduct 20% from the interest before paying you.
        Thank you for replying. I understand that, but my accountant suggested there'd be an easy way of me personally reclaiming it via my self assessment. Do you know it?

        Comment


          #5
          This isn't something I'm very knowledgeable about, but the amount deducted by the company has to go somewhere.

          I think that the idea is that the company sends the 20% to HMRC (probably twice a year) which is credited to your tax account.
          When you submit your tax return, that tax is recorded as already paid, and is factored into the tax you "owe".

          That's how it works for overseas landlords for example - it's not as simple as it sounds, but it should work OK when you set everything up correctly.
          When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
          Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

          Comment


            #6
            I think the key question here is whether HMRC treats this as part of business, or just an investment. You can reclaim costs on a business, but not on an investment.

            Also, I wonder why this arrangement exists. Any market rate of interest would need to be based on the market rate without the intermediary, unless it was above HMRC's default market rate. I suspect the arrangement exists because the company cannot borrow directly at that rate.

            Comment


              #7
              I suggest you check your self assessment tax return and look for the boxes where you can declare a "loss" from taking a loan and re-lending.

              If there are no boxes for you to claim , I think you should be billing your company for re-imbursing your loss.

              Let your company carry the loss forward and claim against future profits.

              Comment


                #8
                For anyone who is interested, my accountant explained how to do this.

                In short, I put the interest I received from my company as "other taxable income" in box 17 on page TR3. I then put the exact same amount in box 18 (as "total amount of allowable expenses"), and then put the tax withheld via the CT61 in box 19 under "any tax taken off box 17".

                I've now submitted and it's worked a treat -- my tax calculation clearly includes this refund.

                Thank you to everyone who replied.

                Comment


                  #9
                  This is very helpful indeed. As I understand your company pay 20% of the interest to HMRC CT61. Your company then pays 80% of the interest to your personal account. You claim SA relief HS340 for the 20% you already paid to HMRC.

                  Do I understand it correctly: The relief you are getting is against your tax liability on other income. Since you are out-of-pocket by the 20% CT61, even if you take additional dividend from the company to make up for it, due to the relief being in place, you won't pay additional dividend tax. If you are a higher tax payer, will you have to pay additional 20% for the 80% you received (because you paid only 20% to HMRC)?

                  Does your company need to make CT61 returns every 3 months or can you do once every year?

                  If you don't do CT61 returns at all, and only receive the HS340 tax relief on SA, you will loose out on corporation tax allowance for the interest paid. This is the key saving by adopting your method. Would that be right?

                  Comment


                    #10
                    Hi James,

                    Thanks for starting this post as I had/have exactly the same query. I plan to follow your approach as it makes sense but I have one query before doing so: on your personal tax return in box 19 (or anywhere else on the form for that matter) do you state which company withheld the 20%?

                    When I complete the CT61 form for the company it does not allow me to provide details of who it is being withheld from. So I am very confused how HMRC connect the CT61 cash received from the company, and the personal tax account that it is being applied against. I am concerned I have made a mistake somewhere perhaps on the CT61?

                    Many thanks,
                    Richie

                    Comment


                      #11
                      Originally posted by leaseholder64 View Post
                      I think the key question here is whether HMRC treats this as part of business, or just an investment. You can reclaim costs on a business, but not on an investment.
                      Would you elaborate on this please? Surely borrowing money personally that you on-lend to a company that you own is tax deductible. I do not understand what point you are making.

                      Also, I wonder why this arrangement exists. Any market rate of interest would need to be based on the market rate without the intermediary, unless it was above HMRC's default market rate. I suspect the arrangement exists because the company cannot borrow directly at that rate.
                      I am sure you are correct in your suspicion. But why do you consider that OP should make a profit on his loan to the company? Why does the Official Rate of interest apply on a loan to a company? Are you suggesting that OP cannot make an interest-free loan to the company?

                      Comment


                        #12
                        Originally posted by richie3000 View Post
                        Hi James,

                        Thanks for starting this post as I had/have exactly the same query. I plan to follow your approach as it makes sense but I have one query before doing so: on your personal tax return in box 19 (or anywhere else on the form for that matter) do you state which company withheld the 20%?

                        When I complete the CT61 form for the company it does not allow me to provide details of who it is being withheld from. So I am very confused how HMRC connect the CT61 cash received from the company, and the personal tax account that it is being applied against. I am concerned I have made a mistake somewhere perhaps on the CT61?

                        Many thanks,
                        Richie
                        Just wondering if anyone had any thoughts on this, as I need to complete the tax return. I plan to follow the advice of James but would be good to understand how HMRC know which entity has with held the tax!

                        Comment


                          #13
                          Originally posted by richie3000 View Post

                          Just wondering if anyone had any thoughts on this, as I need to complete the tax return. I plan to follow the advice of James but would be good to understand how HMRC know which entity has with held the tax!
                          They won't know. In fact, they won't even be aware that this is due to a CT61 witholding of tax at all. But I'm not sure why you think that that matters? If HMRC queries it you can simply explain then.

                          For what it's worth, I've now done this on three years' tax returns and it's never been queried. I've just received my tax refund.

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