Date posted: 23rd Jul 2024
HMRC form CT61 is a form required to be completed by a company if the company pays interest, royalties and other similar payments to an individual.
Unlike banks and building societies that can pay interest, without the deduction of tax, companies are, in certain circumstances, required to withhold 20% tax from any interest payments due to individuals and pay this 20% over to HMRC.
We mainly see the use of form CT61 when a company is paying interest to a director, on a credit directors loan balance.
For example, Joe Bloggs may have a credit directors loan account of £100,000 with his company, J Bloggs Limited. Joe may want a return on his loan and a 5% interest rate is applied to the loan. The company will therefore owe Joe £5,000.
Once the interest becomes payable, the company will pay Joe £4,000 and pay £1,000 to HMRC in respect of the 20% tax due. The company will declare and pay this amount via the form CT61.
Strictly the company should provide Joe with a form R185 certificate confirming the interest paid and the tax deducted. Joe will then need to declare the interest on his self-assessment tax return and pay any further tax due via self-assessment.
The company needs to file quarterly CT61s with HMRC, for every quarter that interest is paid. This assumes that the company has a calendar accounting period i.e. 31 March, 30 June, 30 September or 31 December. If the company has another year end, then it will need to complete two forms CT61 for a quarterly period.
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