Clarification on directors' loans

Hi there, I have a few questions regarding the notion of directors' loans. All questions are about a director loaning money to a close LTD company incorporated in England and Wales. (1) Is there anything specific I should write in the bank transfer description/reference for the directors' loan, in case a director is funding the company with a zero interest loan, (a) in the bank transfer from the director to the company and (b) from the company back to the director? (2) Are directors' loans aimed at funding the company only available to directors of a LTD company or also to its shareholders? If not specifically available to shareholders, is a shareholder lending money to his/her company considered the same as a third party lending to the company? Is there any difference if the shareholder holds an interest in a trading company to which he is lending through the use of a holding company? (3) Directors' loans can be used to help with startup costs as an alternative to a share capital subscription. However, some startup costs could be born by the prospective director of a company that is still to be created, for the purposes of starting the company itself, before the company is incorporated formally. If a director personally bears costs that are logically and reasonably connected to the activity that the soon-to-be-incorporated LTD company will carry out, and this happens reasonably close to the date of incorporation, can these payments be considered a director's loan even if the company still doesn't exist? Examples could be the cost of website hosting, email, accounting/legal advice to set up the company and any reasonable cost that a director would incur as a function of his role. The need for this might arise, for instance and among other things, if for any reason the incorporation of the company is delayed but some costs have already been incurred. (4) Is a zero interest directors' loan from the director to the company (for startup costs) legitimate since it doesn't follow the usual "at arm's length" requirement for this kind of operation? Do you confirm it is not a benefit-in-kind (or similar) for the company? (5) Assume a director loaning money to his company wants to relieve the company (and therefore also any other director) from the risk of taking on the loan itself. He decides to write a note to the company (or a simple contract) where he agrees that if the company cannot at any point in good faith and reasonably repay the loan, any and all claims from the director towards the company and in relation to that loan become void. In other words he agrees that the loan is repayable only if and when the company can afford it. Is this (a) legitimate, and (b) does it have any implications as far as HMRC is concerned? Thanks a lot for your help

Hi
Guidance on when you lend your company money is available at Director's loans: If you lend your company money.
Guidance on loan relationships is available at  CFM30000 - Loan relationships: Contents - HMRC internal manual onwards.
Not all pre-incorporation costs can be claimed. For example, you cannot claim the one-off company formation costs associated with incorporating your business as this is regarded as a capital expense.  Please refer to guidance at BIM46351 - Specific deductions: pre-trading expenditure: scope - HMRC internal manual 
Whilst you aren't legally required to use an accountant, completing accounts for a limited company can become complex.  It's one of the considerations you need to make before setting up a limited company.  
Corporation Tax is a regime based on self assessment. HMRC doesn’t offer an accountancy service or tax planning advice.
If after referring to all available guidance and relevant legislation, you are unable to complete the company accounts, computation and tax returns, please seek advice from an accountant.  
Your question regarding a written agreement is possibly more appropriate to Companies House or even Company Law.  
Sorry we cannot be of more help with this.
Thank you
 

Dear HMRC Admin, thank you for your kind reply and for providing guidance. Let me reassure you that I have every intention of engaging with an accountant. Even after referring to the literature you have pointed to, I still do not understand whether: (1) directors' loans are also available to shareholders (besides directors of the company) to help with startup costs (2) on pre incorporation costs: excluding capital expenses, the company can claim back certain "pre-trading expenditure". Does pre-trading expenditure include non-capital pre-incorporation costs? If such costs were born by directors, a "non-trading debit" would be created within the scope of CFM32100 - Loan relationships: non-trading deficits: pre-trading expenditure. These are applicable pre-trading, but are they also applicable pre-incorporation? Does that automatically create a pre-trading, pre-incorporation directors' loan? Thank you again for the support.

Hi ,
 

Thank you for your follow up query, if the guidance which we have provided has not covered or answered your questions. Then you will need to seek financial advice from e.g an accountant who will be able to help you on this matter. HMRC cannot offer this financial advice. Thank you .

Dear HMRC, thank you for your reply. One more simpler question – does a loan from a shareholder (not director) of a ltd company for the purposes of helping with startup costs need to be at arm's length/market conditions? Is it a benefit in kind for the company if it's 0 interest? Thank you.

Hi,
As previously advised HMRC cannot offer accounting advice on the treatment of loans to the company.  
You should seek the services of an accountant or financial advisor to assist with your query. 
Thank you