Intercompany Loan SPV

[Craig@Clarity]

Yes I'm sure about this. Ask him about Franked Investments

Let me correct myself. They used to be called Franked Investments but since the change in 2016 and the abolition of tax credits, it's simply exempt from CT if the dividends are from UK company to UK company. You'd just adjust for the dividend income on the tax computation. Still no CT consequence though

[craigy1874]

Let me correct myself. They used to be called Franked Investments but since the change in 2016 and the abolition of tax credits, it's simply exempt from CT if the dividends are from UK company to UK company. You'd just adjust for the dividend income on the tax computation. Still no CT consequence though

Agreed.

If your accountant is advising you dividends are taxable when received by a company, I would recommend you get another accountant - that's basic stuff.

[LoanCharged]

Let me correct myself. They used to be called Franked Investments but since the change in 2016 and the abolition of tax credits, it's simply exempt from CT if the dividends are from UK company to UK company. You'd just adjust for the dividend income on the tax computation. Still no CT consequence though

Thanks for the clarification and you are indeed correct. I may have misconstrued this due to my accountant setting this up a certain way in FreeAgent. It appears FreeAgent can not handle this scenario and shows the dividend is liable to CT.

In reality, the accountant would adjust for this in the tax computation separately regardless is what FreeAgent is showing.

[Craig@Clarity]

Thanks for the clarification and you are indeed correct. I may have misconstrued this due to my accountant setting this up a certain way in FreeAgent. It appears FreeAgent can not handle this scenario and shows the dividend is liable to CT.

In reality, the accountant would adjust for this in the tax computation separately regardless is what FreeAgent is showing.

That would be the best way (for your accountant to adjust for it separately). However, if you're dead set on having Freeagent give you a more accurate estimate, the work around that I can see would be to create an admin expense account and untick the box that says allowable for tax. Yes, it's an expense account rather than an income/sales account and you'll end up with a credit balance on this newly created account, but it could work out your CT more accurately. I've not tried or tested it but if my logic is right, it's a rough and dirty work around.

[LoanCharged]

That would be the best way (for your accountant to adjust for it separately). However, if you're dead set on having Freeagent give you a more accurate estimate, the work around that I can see would be to create an admin expense account and untick the box that says allowable for tax. Yes, it's an expense account rather than an income/sales account and you'll end up with a credit balance on this newly created account, but it could work out your CT more accurately. I've not tried or tested it but if my logic is right, it's a rough and dirty work around.

I think I have cracked it! I created a new Income category called (Intercompany Dividend) and allocated the payments to that. I then added a journal entry moving the Intercompany Dividend to the Contra account. The P&L now looks spot on as does the Balance Sheet.

[richardy]

interest free loan

This works well. But there is no need to charge interest and it is tax neutral so I wouldn't bother.

Are you sure interest doesn't need to be charged at market rate?
I see many accountancy related websites suggesting it does, e.g.
FRS 102: Loans between related parties | AccountingWEB

What if the loan goes beyond a tax year?

[richardy]

You don't need to charge interest. You don't need to make (regular) repayments. You can repay whenever it suits.

Are you sure no need to charge interest as many accountancy websites suggesting should charge market rate?

[TheGreenBastard]

I'm not experienced / knowledgeable on changing the SIC of your IT Co to another SIC , and then starting up another company for your IT business. It doesn't sit right with me but at the same time I can't find anything wrong with it. Will be interesting to see what the others on CUK think about it.

You're right, it's nonsense.

No bank is going to provide a mortgage for a company with a changed SIC, the reason is all that pre-BTL history is deemed a risk.

Banks will lend to already existing BTL Ltds or new SPV Ltds.