Connected companies loan

[ChimpMaster]

Has anyone here got more than 1 Limited Co (i.e. the other being non-contracting) and loaned a significant sum from one to the other?

Example: IT Co loans £100k to Property Co for purchase of BTL?

Speaking to my accountant who says: the loan can be made at zero % interest and redeemable on demand, i.e. open-ended payment timeframe. So long as both companies continue to exist, then there is no need to repay the loan. The loan can at some point be written off in the IT Co and credited to the Property Co, with required tax being paid only the once as required (i.e. loss on IT Co but as income in Property Co).

All makes sense to me but just wanted to know if anyone had differing (but educated) views on this scenario?

EDIT: this loan scenario also negates the need for a group structure, which I have researched in the past.

[aj4u]

I'd be keen for an answer here too.

Thanks AJ

[simes]

Subverting the response to the question for the moment, if the example you cite is what you are actually doing, thereby incurring the need for this arrangement, then Magellan Mortgage Loans offer mortgages to Ltd Cos that are Not actually SPVs.

You then won't need to set up a separate company, nor pay for a whole new set of annual accounts.

[jmann]

Has anyone here got more than 1 Limited Co (i.e. the other being non-contracting) and loaned a significant sum from one to the other?

Example: IT Co loans £100k to Property Co for purchase of BTL?

Speaking to my accountant who says: the loan can be made at zero % interest and redeemable on demand, i.e. open-ended payment timeframe. So long as both companies continue to exist, then there is no need to repay the loan. The loan can at some point be written off in the IT Co and credited to the Property Co, with required tax being paid only the once as required (i.e. loss on IT Co but as income in Property Co).

All makes sense to me but just wanted to know if anyone had differing (but educated) views on this scenario?

EDIT: this loan scenario also negates the need for a group structure, which I have researched in the past.

Are you sure loan can be written off? I was advised by my accountant to charge a low interest rate to avoid any problem with HMRC. The group structure is more expensive but it would be the safest option. My accountant is charging £250 per year for the holding company which is not that bad.

[ChimpMaster]

Are you sure loan can be written off? I was advised by my accountant to charge a low interest rate to avoid any problem with HMRC. The group structure is more expensive but it would be the safest option. My accountant is charging £250 per year for the holding company which is not that bad.

My accountant said that the group structure can be seen as artificial. And that there was no need to go this route because the inter-company loans (along with subsequent write offs) would suffice.

Not the most straightforward scenario so would be interesting to get the view of accountants here, or from those contractors who have done something similar.

Am also asking my property accountant - waiting for a response.

[craigy1874]

Has anyone here got more than 1 Limited Co (i.e. the other being non-contracting) and loaned a significant sum from one to the other?

Example: IT Co loans £100k to Property Co for purchase of BTL?

Speaking to my accountant who says: the loan can be made at zero % interest and redeemable on demand, i.e. open-ended payment timeframe. So long as both companies continue to exist, then there is no need to repay the loan. The loan can at some point be written off in the IT Co and credited to the Property Co, with required tax being paid only the once as required (i.e. loss on IT Co but as income in Property Co).

All makes sense to me but just wanted to know if anyone had differing (but educated) views on this scenario?

EDIT: this loan scenario also negates the need for a group structure, which I have researched in the past.

This is almost completely correct except because the companies are connected for tax purposes, there is no tax charge on the write off of the loan.

I advise my clients on this setup when they want to involve a property company.

[craigy1874]

My accountant said that the group structure can be seen as artificial. And that there was no need to go this route because the inter-company loans (along with subsequent write offs) would suffice.

Not the most straightforward scenario so would be interesting to get the view of accountants here, or from those contractors who have done something similar.

Am also asking my property accountant - waiting for a response.

How can it be artificial? It is what it is, if it is a group then it is a group!

[jmann]

This is almost completely correct except because the companies are connected for tax purposes, there is no tax charge on the write off of the loan.

I advise my clients on this setup when they want to involve a property company.

With this setup, if one company runs into trouble, wouldn't it affect both? For example, if the trading company runs into financial trouble, then loan has to be repaid by property company right? With a holding company structure, this can be avoided.

[Iliketax]

Speaking to my accountant who says: ...

What did your accountant say about the close companies' gateway of the disguised remuneration rules?

[Iliketax]

I advise my clients on this setup when they want to involve a property company.

What do you say to your clients about the close companies' gateway of the disguised remuneration rules?