Not reducing the loans maintains his interest repayments and maximises his group tax losses muscle.Each year we aren't paying him 80,000,000 x 0.05, unless we haven't started paying off the principal of the loan. If we're just giving him interest payments, then yes you're correct, but that hardly makes sense unless he's not interested in recouping his loan and just wants a revenue stream. It's like people just paying the interest on their mortgage, they only do that if they're going to sell the house in 10 years at double the value or something like that.
So in reality we've probably got a repayment structure set up where we're giving him maybe 5,000,000 or more a year, so the real maths is Principal for Year 2 = Principal for Year 1 - (Repayment amount -[Principal for Year 1 x 0.05]). Just to use a bit of finance.So each year while we are paying him a constant amount, the amount of interest would be decreasing. Of course that is offset by additional transfers and additional loans. What I don't understand is why there isn't someone at the club who is able to determine whether or not they want to accept these loans. Fairly sure there's something not quite right with essentially loaning personal money and then drawing a return from it. I suppose he owns the company, but it doesn't seem right to me.