What is a CT61?

Although most banks and building societies do not have to deduct Income Tax from interest payments they make to depositors from April 2016, the same does not apply to others that pay interest.

Consider an owner managed company whose directors have deposited a considerable sum with the company that has been credited to a loan account in the company books. Periodically, the company makes an interest payment to the directors involved.

When an interest payment is made the company will have to pay 80% to the director and 20% basic rate tax to HMRC. The company will then be required to notify HMRC that the payment has been made and pay over the tax deducted.

The CT61 is the form that will need to be completed. Regular payments will have to be reported and paid quarterly. To ease the red-tape, payments of interest could be made at the end of the tax year in which case only one return would be necessary.