Key Takeaways
- If your company owes you money as a director, you have the right to recover sums such as loans, expenses, and unpaid salary, but acting promptly protects your legal position.
- It is possible to write off a director loan in the UK, but this requires careful documentation and a formal board resolution to ensure it is legal and compliant.
- Failing to address unpaid director loans or expenses may result in personal financial loss, increased tax liability, or claims from creditors if the company is insolvent.
- Writing off a director loan can trigger both company and personal tax consequences under s455 and s415 CTA 2010, so always seek advice on your tax position before proceeding.
- Unlawful write-offs or undocumented repayments can expose you to risk of misfeasance proceedings or claims of unlawful distributions, especially in insolvency.
- There is usually a statutory limitation period of six years to recover debts from a company, so start any recovery proceedings as soon as possible.
- Directors should always follow proper corporate governance processes and retain clear evidence of all sums owed, repayments, and write-off decisions.
- If you face complex disputes or company debtor director rights issues, our solicitors can provide practical support to protect your interests.
- We are rated Excellent on Trustpilot with over 130 five-star reviews and a 4.9/5 rating from satisfied clients.
For clear advice on director loan recovery or write-off, call us for a Free Consultation on 0207 459 4037.
What Should You Do If Your Company Owes You Money as a Director in the UK?
Unresolved debts owed to directors can quickly lead to tax complications, lost recoveries, or legal challenges if the company faces insolvency. Common examples include outstanding director loans, business expenses you have paid out of your own pocket, or unpaid salary. Each route carries specific legal rights and steps under the law of England & Wales. Getting this right makes the difference between a smooth recovery and a costly, disputed process.
Our specialist solicitors help directors clarify their legal options, structure compliant write-offs, and document recoveries with HMRC, Companies House, and the courts. Securing robust paperwork at the outset is essential for maintaining your legal position and minimising risk.
What Should You Do If Your Company Owes You Money as a Director?
Directors may be owed money in several forms:
- Director’s loans: Money you have lent personally to the company, perhaps to help with cashflow or business expansion.
- Expenses: Business costs you have paid for directly, such as client travel or supplies.
- Salary/bonuses: Agreed earnings that have not yet been paid under your contract.
- Dividends: Entitlements arising only after a lawful declaration by the board, supported by sufficient distributable profits.
Clearly identify which category applies and collect supporting documents such as board minutes, loan agreements, payslips, or receipts.
A methodical approach prevents disputes and ensures you follow the correct legal remedy for each type of debt.
When Does a Company Owe a Director Money? Common Scenarios and Triggers
Common scenarios where a company is in debt to a director include:
- You have personally funded company operations by advancing your own money.
- You are awaiting repayment for legitimate business expenses, such as £2,500 in hotel and travel charges for a project.
- Your agreed salary or bonuses remain unpaid, sometimes deferred due to company cashflow.
- The company has declared a dividend, but payment has not been received due to administrative or financial delays.
Distinguishing exactly what the company owes you avoids mixing up legal entitlements and improves your success when it comes to recovery or write-off.
What Types of Sums Can a Director Recover? (Loans, Expenses, Salary)
- Director Loans: Recover all money you have clearly documented as lent to the company.
- Expenses: Claim for business expenses you have paid, using receipts or detailed logs.
- Salary/Bonuses: Claim any unpaid earnings or contractual commissions, provided these are minuted or agreed.
When companies experience financial trouble, repaying director loans or expenses must be carefully managed to avoid preference or misfeasance claims if insolvency is looming.
Are Dividends Treated as Director Debt?
A dividend becomes a recoverable debt only once lawfully declared by the board and the company holds sufficient distributable profits. If dividends have not been properly declared, or the company is not in a position to pay them legally, no enforceable debt exists.
With the right paperwork and process, you can confidently pursue your entitlements while keeping your compliance position secure.
Can You Legally Write Off Money Owed by Your Company as a Director?
Directors can agree to write off sums the company owes them—commonly director loans—but only through a strict legal process. This process has significant tax and legal consequences for both the company and the director.
When Is a Director Loan Write-Off UK Legal?
A write-off is legal if:
- The director actively agrees to forgo the sum, ideally in writing.
- The company remains solvent and is not favouring one creditor to the detriment of others (an unlawful preference).
- Appropriate approvals and resolutions are secured in accordance with the company’s articles or shareholders’ agreement.
- The decision is carefully documented and properly reflected in the company’s accounts.
In distressed companies, writing off debts can easily become grounds for a challenge by creditors or liquidators. Legal advice ensures you avoid personal liability.
What Corporate Steps Must You Take to Write Off a Director’s Loan?
- Check the company’s articles and any shareholders’ agreements for specific approval requirements.
- Call a properly convened board meeting; table and minute the proposal for a write-off.
- Approve the write-off by board (and, if necessary, shareholder) resolution.
- Update company accounts and reflect the write-off in both internal records and statutory filings at Companies House.
- Synchronise disclosures with your company’s corporation tax return and notify HMRC of the transaction as required.
Following this formal route limits risk of HMRC penalties and challenges from other stakeholders later on.
Step-by-Step: How to Recover Money Owed by Your Company or Write Off a Director Loan
Success in recovering unpaid sums or writing off a loan as a director hinges on solid records and careful corporate governance.
How to Claim Unpaid Expenses, Salary, or Loans – Practical Process
- List all sums owed by type—director loan, salary, expenses, or dividends.
- Pull together all documentary evidence: loan agreements, expense logs, payslips, board minutes.
- Submit your claim to the company in writing, ideally as an agenda item for a formal board meeting.
- Assess the company’s solvency and verify there are sufficient distributable profits before seeking payment.
- If claims are disputed or ignored, consider mediation, formal statutory demand, or county court proceedings to recover the debt.
To learn more about common compliance pitfalls and HMRC’s approach, read our article on managing an overdrawn directors’ loan account.
Written Record-Keeping and Board Resolutions Explained
- Maintain a running summary of your director loan account, detailing every advance and repayment.
- Keep all supporting invoices, contracts, and receipts for expense or salary-related claims.
- Properly minute board and shareholder resolutions, with clear signatures and dates, for each claim or write-off.
- Update company accounts and ensure all required Companies House filings accurately reflect repayments or write-offs.
Evidence to Retain for Loans, Repayments, and Write-Off Decisions
- Signed loan agreements or extracts from board minutes approving advances
- Bank statements with matching transactions
- Itemised expense claims and receipts
- Formal letters or signed acknowledgments for any write-off
If you are unsure your records are sufficient, ask our team to review your documentation for legal and tax compliance.
What Tax Consequences Apply When a Director Loan Is Written Off? Section 455 and Section 415 CTA 2010
Writing off a director’s loan triggers direct tax implications for both the company and the individual director under the Corporation Tax Act 2010.
Does Loan to Director Write-Off Trigger Additional Tax?
Yes, and the consequences are significant:
- Section 455 CTA 2010: If a director’s loan is outstanding for more than nine months after year-end, the company must pay a 33.75% corporation tax (from April 2022). Repayment of the loan later can trigger a refund. However, if written off, the section 455 tax is not usually recoverable.
- Section 415 CTA 2010: For the director, any written-off loan is treated as income—taxed either as extra salary (subject to Income Tax and National Insurance) or as a dividend. This has to be included in the director’s self-assessment tax return.
- National Insurance: If the amounts written off originate from unpaid salary or bonuses, there may also be National Insurance contributions for both the employer and director.
We work closely with accountants to ensure your director loan recovery or write-off is tax-efficient and fully compliant.
What Risks Do Directors Face If Company Loans Are Not Properly Dealt With?
Directors who ignore or mismanage sums owed to them can face personal financial loss, mounting tax liabilities, and exposure to legal claims.
Insolvency, Creditor Claims, and Unlawful Distributions Explained
When a company is insolvent or likely to become so:
- Repaying or writing off a director’s loan can be classed as an unlawful preference. A liquidator may set aside such payments if they are seen as putting you ahead of other creditors.
- Repayments without proper authorisation or records could be treated as unlawful distributions under company law. This can lead to an order requiring you to repay the sum to the company.
- HMRC may also investigate the timing or treatment of repayments or write-offs, especially if tax isn’t correctly accounted for.
Meticulous compliance with all procedures, especially when the company is in trouble, is crucial. Immediate legal review is strongly recommended if there’s a risk of insolvency.
Board Conduct, Misfeasance, and Regulatory Issues
Directors owe a fiduciary duty to the company and must always act in its best interests:
- Writing off loans or accepting repayments without proper approvals may breach these duties and result in misfeasance proceedings.
- In insolvency, you must prioritise creditors’ interests. Any payment or write-off not in line with the rules can be clawed back, and directors may face personal liability.
If you are already at risk or facing creditor threats, our experts can act rapidly to secure your position.
What Laws and Deadlines Apply to Director Loan Recoveries and Write-Offs?
Companies Act 2006 and Corporate Formalities
The Companies Act 2006 sets strict requirements:
- Loans to or from directors must be properly approved, in line with articles and shareholder agreements.
- Write-offs must be authorised via a board (and sometimes shareholder) resolution, documented in statutory accounts, and disclosed at Companies House.
- Breaches can be voided or lead to court scrutiny and regulatory penalties.
Tax Acts (CTA 2010 s455, s415): How They Impact Directors’ Loans
- Section 455 CTA 2010: Triggers a corporation tax charge of 33.75% on unpaid director loans not repaid within nine months after year-end.
- Section 415 CTA 2010: Any loan written off is treated as taxable income for the director and must be stated on self-assessment.
Limitation Periods: How Long Do You Have to Recover a Debt from Your Company?
The Limitation Act 1980 restricts the period during which you can claim money from your company:
- The usual deadline is six years from the date your debt became due.
- Miss this period and the court may bar your claim entirely, leaving you unable to recover money owed.
Understanding these deadlines ensures you remain within your legal rights and avoid a time-barred claim.
What Do the Courts Say About Director Loans and Company Debts?
| Case | Facts | Outcome | Why It Matters |
|---|---|---|---|
| Re Ghyll Beck Driving Range Ltd [1993] BCC 229 | Company repaid a director loan just before becoming insolvent. The liquidator challenged the repayment. | Repayment was set aside as a preference. | Sums paid to directors prior to insolvency may be reversed if other creditors are disadvantaged. |
| Holland v HMRC [2010] UKSC 51 | HMRC’s approach to taxing written-off director loans. | Written-off loans treated as taxable income for the director. | Failure to plan for tax consequences can result in unexpected liabilities and penalties. |
| It’s A Wrap (UK) Ltd v Gula [2006] EWCA Civ 544 | Director lacked documentary proof for loans he claimed to have made. | No recovery allowed. | Directors must keep clear and complete evidence—no proof, no claim. |
These examples show that strict documentation and procedural compliance are essential. Courts and HMRC expect written, dated, and signed evidence for every debt, repayment, and write-off. Gaps in your records can lead to lost recoveries or regulatory sanction.
If you need analysis on whether the law supports your position, our lawyers provide tailored advice based on the latest decisions.
Our Winning Approach to Director Loan Write-Off and Recovery
- Our specialist team is trusted by directors and businesses across England & Wales for resolving company loan and expense disputes.
- We offer fixed-fee reviews of your accounts, board records, and corporate resolutions to provide documentary protection against disputes or tax investigation.
- Use our secure Go Transfer portal to share your sensitive documents with our expert lawyers from anywhere in the UK.
- Speak directly with a business disputes solicitor for tailored answers by phone, email, or WhatsApp—rapidly and confidentially.
- If urgent action is needed to stop loss or protect your claim from liquidators or Companies House deadlines, we can act immediately.
- Our recovery strategies minimise regulatory, tax, and litigation risks, giving you practical, robust solutions.
- For solvent company debt recovery, we may be able to offer no-win-no-fee options, so you control spend and downside risk.
Arrange your Free Consultation with one of our director dispute lawyers for clear, commercially effective action.
We move quickly to safeguard your money, your company, and your reputation.
Frequently Asked Questions
Can I just write off a director’s loan without paperwork?
No. Every write-off must be approved through a formal board resolution and recorded in the company’s accounts. Informal arrangements risk serious tax and legal exposure.
Does writing off money owed by my company affect my personal tax return?
Yes. HMRC will generally treat a written-off director loan as a benefit-in-kind or dividend, which must be disclosed on your self-assessment tax return.
What happens if I try to recover salary or expenses after the company is insolvent?
Recoveries after insolvency are often challenged by the liquidator. As a director, you will usually be ranked as an unsecured creditor and may receive only a proportion of your claim, if anything.
Can creditors stop me from recovering loans the company owes?
Yes, especially if the company is insolvent. Creditors’ claims usually rank ahead of director debts, and repayment can be blocked or clawed back if it misapplied company assets.
Is a board meeting and resolution always required for a director loan write-off?
Nearly always. Formal board approval is a legal and tax necessity. Further shareholder approval may also be needed under your company’s constitution.
Who is liable if a director loan was unlawfully written off?
Directors authorising or accepting unlawful write-offs risk court orders for repayment, breach of duty claims, and even misfeasance liability in insolvency.
Can I still be paid if the company goes into administration?
Possibly, but you’ll rank as an unsecured creditor and payment depends on funds left after higher-priority claims are settled.
Are family members’ loans treated differently from standard director loans?
No. Loans from family members must follow the same approval and documentation process as any other director or third-party loans to the company.
What is the risk if I wait more than six years to recover money owed by my company?
After six years, your claim is likely to be time-barred under the Limitation Act 1980 and recovery through court proceedings is usually blocked.
Is there a difference between director loans and shareholder loans for legal write-off?
Yes. Shareholder loans may have different authorisation requirements or tax consequences compared to director loans. Always verify which applies before taking action.
Get Expert Help With Director Loan Recovery and Write-Offs
Understanding your rights and obligations when recovering money from your company as a director—or formally writing off a debt—can protect you from costly mistakes, tax penalties, and personal liability. The rules are strict; missing a key procedure or deadline may undermine your claim or attract HMRC scrutiny.
Our solicitors specialise in director loan recovery, lawful write-offs, and representing directors in complex company finance disputes. We will help you document your position, secure necessary approvals, and act decisively if insolvency or legal challenges arise.
For peace of mind and a tailored strategy, call us on 0207 459 4037 or use our online booking form to arrange a Free Consultation.
