This guidance note provides an overview of the tax implications for the company to consider when loans are made to companies by their shareholders and directors and provides links to other guidance notes setting out more detail on the various rules.

See also the Raising business finance - loans guidance note for further details of the tax implications for the individual lenders, rather than the company borrower. Two tax advantages that may be relevant, and may also mean that an individual would prefer to make a loan to a company rather than an equity investment, are:

1. •

   if an individual borrows money to purchase shares in a close company in which they own at least 5% of the shares, then the interest paid on that loan may qualify for tax relief - see the Qualifying loan interest guidance note

2. •

   if a loan to a trader cannot be recovered then, provided the statutory conditions are met, relief should be available to the lender for the irrecoverable amount of the principal of the loan as a capital