Last updated: Nov 02, 2026
A directors’ advance (or a directors’ loan) arises when the directors of a company take money out of the company that is not salary, a dividend or a repaid business expense. Likewise, if the company owes the directors money, drawing that balance back does not create a loan. Once a loan account goes overdrawn (ie, where a director owes the company as opposed to the other way around), three sets of rules apply; if it is a close company, the company must pay tax to Revenue on the loan unless an exclusion applies, an interest-free loan is a benefit in kind, and company law generally caps the loan at 10% of the company's relevant assets.
Can my company lend me money?
Yes, within limits. Advances to all of the company's directors and the people connected with them must together be less than 10% of the company's relevant assets. That is its net assets as shown in the last financial statements laid before the members or, if none have been laid yet, its called-up share capital. Above that, the loan generally needs the Summary Approval Procedure to be followed before it is made.
How is an overdrawn director's loan taxed?
If you are a shareholder (or other participator, or their associate) in a close company, the company must pay Income Tax at the standard rate on the grossed-up loan. A close company is an Irish-resident company controlled by five or fewer participators, or by participators who are directors. On a €12,000 loan, that is €3,000, or 25% of the amount you took. The tax goes on the company's Corporation Tax return and is not deductible for Corporation Tax.
Do I get that tax back when I repay the loan?
Yes. When you repay, the company can claim the tax back, in proportion to the amount repaid. The claim must be made within four years of the end of the tax year in which you repaid it. If the loan is written off instead, the grossed-up amount is treated as your income, you get a non-refundable credit for the tax deducted, and the company cannot reclaim the tax it paid.
Is there benefit in kind on an interest-free director's loan?
Yes. If you pay less interest than the rate Revenue specifies, the difference is a benefit in kind. The rate is 13.5% for most loans and 4% for a qualifying home loan. On a €10,000 interest-free loan outstanding for the whole year, you are taxed on €1,350. The company runs it through payroll and deducts Income Tax, PRSI and USC.
Is there a small-loan exemption?
Only in narrow cases. A loan of €19,050 or less to a full-time director or employee of the company (or an associated company) is outside the 25% charge, but only if you own or control 5% or less of the ordinary shares of the company or an associated company.
What happens if I break the rules?
Making a loan that breaks section 239 is a category 2 offence for any officer in default, and the company can generally void the loan. Separately, if the company is wound up unable to pay its debts and a court finds that a loan to you contributed materially to that, it can make you personally liable, without limit, for all or part of the company's debts and other liabilities.
Under section 239 of the Companies Act 2014, a company cannot make a loan to a director, a director of its holding company, or a person connected with a director. The Act sets out these exceptions:
The 10% rule (section 240): all such loans together are less than 10% of the company's relevant assets.
Summary Approval Procedure (section 242): the members pass a special resolution, accompanied by a declaration from the directors, in the 12 months before the loan is made.
Business expenses (section 244): the company can give you funds for vouched expenses you incur for the company. Anything owed under this must be cleared within 6 months of when it arose, or it is a category 4 offence.
Group companies (section 243): a company can lend to its holding company, its subsidiary or a fellow subsidiary.
Ordinary course of business (section 245): a company whose business includes lending can lend to a director on terms no more favourable than it would offer an unconnected person of the same financial standing.
If the loan goes over 10%
A loan can drift over 10% without anyone taking out more money, for example because the company's assets fall. Once the directors become aware, or ought reasonably to be aware, the company, its directors and the borrower have 2 months to amend the terms so the total falls back under 10%. If they do not, the company can generally void the arrangement.
Income Tax paid by the company
A loan from a close company to a participator (such as a shareholder) or their associate must be made under deduction of tax. The company grosses up the loan at the standard rate and pays the Income Tax. At the 20% standard rate, a €12,000 loan grosses up to €15,000 and the company pays €3,000. Read Revenue's guidance on loans to participators.
Partial repayment gives a partial refund. Revenue's example: repaying €8,000 of a €12,000 loan returns €2,000 of the €3,000 paid.
Benefit in kind
The benefit is the gap between the interest you actually pay and the interest you would pay at the specified rate: 13.5%, or 4% for a qualifying home loan. It is treated as notional pay for the year. Read Revenue's guidance on preferential loans.
Repay it from your own funds. The company can then reclaim the tax it paid.
Take salary or a dividend and set it against the balance. Each is taxed differently, so check with your accountant before the year end.
Set off money the company owes you, such as expenses you paid personally and have receipts for.
The simplest way to avoid the problem is to take only net salary, dividends and vouched expense repayments from the company, and to reconcile your loan account every month. Incorpro's Accounting and Bookkeeping service can take care of this for you, and our Tax Compliance and Returns service covers the Corporation Tax return it goes on.
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