This article is for company directors in Ireland who are considering borrowing money from their own company or who already have a director's loan in place.
If you're wondering whether taking a loan from your company is legal, what tax you'll pay, or how to avoid criminal penalties, this guide covers the legal exceptions that allow director loans, the multiple tax charges you'll face, and the serious consequences of getting it wrong.
Key Takeaways
• Companies pay 25% corporation tax on director loans outstanding at year-end, refundable only when repaid within four years.
• Director loans exceeding 10% of net assets must be rectified within two months or legitimised through Summary Approval Procedure.
• Interest-free director loans create taxable benefits at 4% for home loans or 13.5% for other personal loans.
• Breaching Section 239 loan restrictions can result in personal liability for all company debts without limitation if insolvency occurs.
• Net assets are calculated using the latest filed financial statements, and multiple loans aggregate when determining the 10% threshold.
Laura Ryan is a practising Barrister at the Bar of Ireland. She graduated from the Honourable Society of King’s Inns in 2024, having previously qualified and practised as a Chartered Accountant in a big four accounting firm.
Can I borrow money from my company for personal use?
Generally no - Section 239 of the Companies Act 2014 prohibits companies from making loans to directors. However, five specific exceptions exist that may allow you to borrow under certain circumstances, including loans under 10% of net assets and using the Summary Approval Procedure.
What's the 10% rule for director loans?
Your company can lend you money worth less than 10% of its net assets without special approvals. Net assets are calculated from your latest filed financial statements, and if multiple loans exist they're added together to determine if you've exceeded the threshold.
Will I pay tax on an interest-free loan from my company?
Yes, you'll face multiple tax charges. The company pays 25% corporation tax on the outstanding loan amount at year-end (refundable when repaid), and you personally pay benefit-in-kind tax on the deemed interest at either 4% (property loans) or 13.5% (other loans).
Can my company reimburse me for business expenses I paid personally?
Yes, companies can reimburse directors' business expenses without restriction and these don't count as loans. You must have proper documentation including receipts and expense claims demonstrating the expenses were legitimately incurred for business purposes.
What happens if my company's net assets fall and my loan exceeds 10%?
You have two months from becoming aware of the breach to rectify the situation. You must either repay enough to bring the loan back under 10% or use the Summary Approval Procedure to legitimize the loan - failure to act makes the arrangement void and can result in criminal prosecution.
What is the Summary Approval Procedure and when can I use it?
The Summary Approval Procedure (SAP) allows otherwise prohibited director loans through formal approvals requiring a statutory declaration of solvency and CRO filing within 21 days. However, SAP cannot be used retrospectively for loans already made and exposes you to personal liability if your solvency declaration proves incorrect.
What are the criminal consequences of breaching director loan rules?
Breaching Section 239 is a Category 2 offence that can result in criminal prosecution, substantial fines, and potential imprisonment. In serious cases involving company insolvency, courts can impose unlimited personal liability for all company debts, removing your limited liability protection entirely.
What happens if my company writes off my director loan?
The full written-off amount becomes taxable personal income added to your total income and taxed at your marginal rate. The company cannot deduct the write-off for corporation tax purposes, and any corporation tax previously paid on the loan is not recoverable once written off.
%20(1).webp)
%20(1).webp)
%20(2).webp)
.webp)