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I have read that a loan from my company to myself should not be more than £5,000. but what about to a friend...who is desperatly in need of cash? What are the rules on that? I can't seem to find anything specific.
You have to ask yourself, "if no-one else will lend this person the money, why should I?"
I can see that a few hundred or maybe even a grand or two might be the sort of money you would be willing to lend, but if someone is desparately in need of 10 grand (or more) why is one of those nice high street companies not prepared to lend it?
I see a high risk of the loan going bad here and if you have loaned it from the company the revenue are not going to let you write it off easily. You are not a bank, they don't expect you to take such a risk.
Many contractors make the mistake that the money in your company business account is your personal slush fund. It's not. There are many "proper" ways to get money out e.g. dividends, salary, etc.
You're going to have to get a director's loan. Then you could potentially loan your pal that money. However I totally agree with Tim. The IR will take a very dim view of it, not to mention the horrendous tax implications (you're trying to make a profit out of it).
Agreeing with Tim that you're not there to act like a bank. Think of it another way, we could all then be loaning money to ourselves and then loaning it out to somebody on the street, who could then put it on a horse at Haydock. We could then all try writing it off as bad debt.
This just won't wash with the IR. Otherwise why not get a director's loan and buy stocks and shares and write off the mistakes ... No, it just doesn't work that way.
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