Loan to a friend from LTD

[LondonManc]

I only generally lend up to £50 to friends and usually when we've gone to the pub and the local cash machine is knackered. Much more than that and you'll put a strain on the friendship imho.

[stek]

I see your concern about the friend.
Read friend = my wife's mother. Wife is 49% share holder in ltd.

How's this setup?

Is this a setup for the MIL allegedly not being able to pay back the loan, Ltd writes it off, money finds its way into your personal account tax free?

You have to think like Hector, he'll be on it like a car bonnet....

[MrMarkyMark]

Shamefully this is true. As the OP doesn't know you it will be a full commercial arrangement.

I thought it would be at least mates rates, I have answered him on a couple of posts on here.

[WTFH]

Are you a friend of garnet?

[kolata]

Is this a setup for the MIL allegedly not being able to pay back the loan, Ltd writes it off, money finds its way into your personal account tax free?

You have to think like Hector, he'll be on it like a car bonnet....

No, no chance to write off the loan, and to get the money for myself.
I guess she can apply for a bank loan, but at ~4.5% minimum I don't see why the she needs to feed the bank.
Granted she will pay 3% to LTD, but this will stay in the LTD (after 20% corp tax on the 3%).
Much cheaper than a bank loan.

So is it allowed/legit?

[northernladuk]

Unfortunately there is no law against doing stupid things so fill your boots.

BTW don't you have an accountant or something?

[TheCyclingProgrammer]

Is this a setup for the MIL allegedly not being able to pay back the loan, Ltd writes it off, money finds its way into your personal account tax free?

You have to think like Hector, he'll be on it like a car bonnet....

You could avoid these accusations by taking the simple approach of taking a directors loan, then loaning personally to MIL.

It means she's liable to you and you're liable to YourCo. If MIL cannot repay loan you still have to repay the director's loan or it will be taxed anyway.

Speaking of being taxed, unless its a very short-term loan you'll probably end up paying s455 tax on it anyway until the loan is repaid.

You can avoid the BIK issue by charging interest (from YourCo to the director) at least equal to HMRC rates and then charging MIL the same amount of interest.

With all that being said, I wouldn't do it!

[stek]

You could avoid these accusations by taking the simple approach of taking a directors loan, then loaning personally to MIL.

It means she's liable to you and you're liable to YourCo. If MIL cannot repay loan you still have to repay the director's loan or it will be taxed anyway.

Speaking of being taxed, unless its a very short-term loan you'll probably end up paying s455 tax on it anyway until the loan is repaid.

You can avoid the BIK issue by charging interest (from YourCo to the director) at least equal to HMRC rates and then charging MIL the same amount of interest.

With all that being said, I wouldn't do it!

Me neither, my (ex) brother-in-law still owes me £3k from about 1994 which was a lot to us then and was in fact the kids Child Benefit we'd saved for them to give them on itheir 18th's!

[SueEllen]

You could avoid these accusations by taking the simple approach of taking a directors loan, then loaning personally to MIL.

It means she's liable to you and you're liable to YourCo. If MIL cannot repay loan you still have to repay the director's loan or it will be taxed anyway.

Speaking of being taxed, unless its a very short-term loan you'll probably end up paying s455 tax on it anyway until the loan is repaid.

You can avoid the BIK issue by charging interest (from YourCo to the director) at least equal to HMRC rates and then charging MIL the same amount of interest.

With all that being said, I wouldn't do it!

Neither would I.

[northernladuk]

Nor me.