Lending money from funds put aside for tax

[northernladuk]

Official rate of interest is 3.25% now, not 4%

HMRC announces fall in official rate of interest for 2014/15 | Moore Stephens Blog

[ContrataxLtd]

hopefully a straight forwards answer to this question.

Relative is setup as sole trader and has a retail business. Lending funds to them on a short term basis could help the business grow more...

Corporation tax funds in company account won't need to be paid until end of 2015.... Is there a legal and legitimate way to lend some of those funds to my close relative for say a period of 9 or 10 months to allow them to increase stock and grow the business?

If you do lend the money be prepared to write it off as soon as you lend it or be willing to ruin the relationship with the relative if things don't go to plan. As others have pointed out, mixing money with friends/family is a recipe for disaster in my experience.

If you do lend the money you need to check to see if you need a consumer credit license, I'm not up to speed on the current rules as I believe they changed in April this year when the FCA took over the management of it all.

Personally, if you do lend the money I'd only do it out of 'free funds' i.e. ones that you could afford to lose.

Also, depending on who the relative is you may be caught by s455 and have the 25% surcharge applied if the loan isn't repaid within 9 months of the yearend (which I assume it would be as you're currently thinking of loaning the money set aside to pay the corporation tax!).

Martin
Contratax Ltd

[NorthWestPerm2Contr]

If you do lend the money be prepared to write it off as soon as you lend it or be willing to ruin the relationship with the relative if things don't go to plan. As others have pointed out, mixing money with friends/family is a recipe for disaster in my experience.

If you do lend the money you need to check to see if you need a consumer credit license, I'm not up to speed on the current rules as I believe they changed in April this year when the FCA took over the management of it all.

Personally, if you do lend the money I'd only do it out of 'free funds' i.e. ones that you could afford to lose.

Also, depending on who the relative is you may be caught by s455 and have the 25% surcharge applied if the loan isn't repaid within 9 months of the yearend (which I assume it would be as you're currently thinking of loaning the money set aside to pay the corporation tax!).

Martin
Contratax Ltd

Considering this is a dear relative, their well being is more important to me than the money... The figure is in 4 digits rather than 5 so losing it will not be the end of the world.

[northernladuk]

Considering this is a dear relative, their well being is more important to me than the money... The figure is in 4 digits rather than 5 so losing it will not be the end of the world.

We are wasting our time here. Let's go for another tactic...

Yeah that's great, no problems. Go ahead. Speak to your accountant.

Thread closed.

[jamesbrown]

This is a terrible idea in every respect. Plus, you're a contractor, so you should be able to roll off a few notes from the wad in your pocket. Don't get your business involved.

[tractor]

...

Aside from putting monies that are provision for VAT & CT etc into a deposit account, it is not sensible nor good practice to commit it to anything.

As far as the specific question, never mix business with pleasure (or anything else come to that) but especially friends and relatives.

[tractor]

...

Considering this is a dear relative, their well being is more important to me than the money... The figure is in 4 digits rather than 5 so losing it will not be the end of the world.

Wellbeing is a health or similar matter, not expansion of a business. You appear to be set on it but are still looking for approval, encouragement or whatever which leads me to think you really are not sure. If in doubt, don't do it. If you really are that hell bent on helping, offer to be a loan guarantor.