Paying interest to your own company

[Valon]

Assalamu Alaikum wa Rahmatullahi wa Barakatuh,

What is the ruling on paying interest to your own business?

For example, if I loan £50,000 from my business (1-person business) to myself personally, upon returning the loan I would need to pay 2% interest, so would end up repaying £51,000 total.

Is this permissible as it will be going back to my business that I own fully?

Note that this extra £1,000 would be a profit for the business and would incur corporation tax of 19%.

Thank you

[Mufti_Billal]

Wasalam

May Allah bless you.

Please see link below:

Paying/receiving interest to yourself via own company

Selam aleykum wa rahmetullah wa baraketuh. I hope someone can answer this, as I haven’t found another place were this is discussed. Just a clarification: I don’t want anything to do with interest-bearing loans, it is haram and, quite frankly, I don’t want to go to war with Allah and his Messenger. In my (Western) country, I want to lend my own company (I have 100% ownership and am the only employer, it’s the same type/structure as an American limited-liability company) an X amount of money. Ho…

Kind regards

[Valon]

JazakAllah Khair Mufti Billal for the response,

Just to clarify, the fact that the tax authorities will benefit from this interest paid to yourself (via taxing it as “profit”) still does not make it impermissible ?

I.e. if I loaned myself £100,000 I’d have to pay back £102,000 to my company, of which HRMC would take 19% of the £2,000 profit (£380)