Lending money from funds put aside for tax

[NorthWestPerm2Contr]

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?

[northernladuk]

Don't lend friends money, particularly from your business.. period...

[eek]

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?

There is a flaw in your plan. How will you pay the tax if you don't get the money back.

There is a simple rule NLUK highlights above. Never lend money to friends and family as getting it back may destroy relationships...

Saying that I'm doing exactly the same for Mrs Eek's new business. But as she is my wife I'm willing to forget about things and write off the money if it doesn't go well..

[northernladuk]

Don't lend friends money, particularly from your business.. period...

EDIT : Even more so when it exposes you to problems. At the very least use spare money you can afford to lose.

[northernladuk]

Saying that I'm doing exactly the same for Mrs Eek's new business. But as she is my wife it's all hers anyway.

Saying that I'm doing exactly the same for Mrs Eek's new business. But as she is my wife and she told me to I don't have a choice.

Couple of FTFY's

[northernladuk]

Gotta ask why you have to lend money that is owed to the tax man. Where is your war chest?

[eek]

Couple of FTFY's

It gets worse than that. I found the business and suggested going for it now. It needs a few grands worth of equipment to do it properly and the equipment plus access to some expertise and training appeared on eBay cheaply

[TheFaQQer]

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?

What happens if it fails? If you haven't got the money to pay the tax, then you're going to be in trouble.

Neither a borrower nor a lender be.

[NorthWestPerm2Contr]

What happens if it fails? If you haven't got the money to pay the tax, then you're going to be in trouble.

Neither a borrower nor a lender be.

Forecast for my business is looking good, I have withdrawn full years allowance hence I have enough money to get me through to May next year with more funds arriving to build up the warchest to get me through to end of next year.... I guess i could wait a month or two and use spare business funds... How would that work then?

[JustinTime]

I guess i could wait a month or two and use spare business funds... How would that work then?

That is a much better idea.

Get a loan agreement from the internet; define a fixed period for the loan; apply a 4% interest rate; get the money back into your company's account within 9 months of your company's year end.

Job done.

There is a 25% tax hit to HMRC if you don't repay the loan within the 9 month window. This is a "bond" to ensure that you're not sneaking money out of the company, and it will be repaid - I think that this is at the end of the next company year end - when the loan is paid off.

BUT...
Don't lend out money that you cannot afford to lose.
Maybe not the best idea to lend to a friend.

HTH.