Intercompany Loan SPV

[eddie1507]

Afternoon Guys,

I'm looking at the most tax efficient way to use Contract Company surplus funds to generate additional cashflow & future investments.

What i'm considering is using my Contractor Co Limited Surplus funds (120k) and create an intercompany loan with a newly create SPV Limited Company.
Within this i will use the cash to purchase 2 or 3 houses via the SPV and use the positive cashflow to repay the intercompany loan with interest (along with paying in personal funds to the SPV over the period to repay back sooner)

Has anyone done this already ? And what rate did you charge on the intercompany loan ? from doing some research if i where to do the above i can say bye bye to and ER relief in the future if i decided to close down the contracting business.

TIA

[LoanCharged]

Why not keep it simple and reclassify the ltd as a property investment company and just buy the properties in it with the money already there.

You just change the sic codes and other bits that your accountant can do for you.

You also create a new ltd to carry on contracting through.

[craigy1874]

Afternoon Guys,

I'm looking at the most tax efficient way to use Contract Company surplus funds to generate additional cashflow & future investments.

What i'm considering is using my Contractor Co Limited Surplus funds (120k) and create an intercompany loan with a newly create SPV Limited Company.
Within this i will use the cash to purchase 2 or 3 houses via the SPV and use the positive cashflow to repay the intercompany loan with interest (along with paying in personal funds to the SPV over the period to repay back sooner)

Has anyone done this already ? And what rate did you charge on the intercompany loan ? from doing some research if i where to do the above i can say bye bye to and ER relief in the future if i decided to close down the contracting business.

TIA

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

[eddie1507]

Why not keep it simple and reclassify the ltd as a property investment company and just buy the properties in it with the money already there.

You just change the sic codes and other bits that your accountant can do for you.

You also create a new ltd to carry on contracting through.

I haven't considered this option thanks for the info ! I will speak to the accountants to see the feasibility on this.

[ChimpMaster]

I have done this.

It's common and easy enough, but make sure you have an accountant that knows what he is doing.

You don't need to charge interest.

You don't need to make (regular) repayments. You can repay whenever it suits. There is no s455 on intercompany loans.

[eddie1507]

I have done this.

It's common and easy enough, but make sure you have an accountant that knows what he is doing.

You don't need to charge interest.

You don't need to make (regular) repayments. You can repay whenever it suits. There is no s455 on intercompany loans.

Thanks ! Is there a limit on the amount of money which can be borrow to the SPV Company ? (Obviously still keeping the Contracting Company Solvent)

[Craig@Clarity]

You could make the SPV a shareholder of your current PSC, pay a dividend to that SPV and there's no CT consequence.

[Maslins]

It's common and easy enough, but make sure you have an accountant that knows what he is doing.

This. It is an area of growing popularity (personally I'm not convinced it's the best idea, but appreciate it's not clear cut either way). However, because of the increased popularity, it can be a bit of a bandwagon for accountants to jump on. I worry some of those simply won't have the knowledge, and the client likely won't know until a few years later when HMRC point out something's done totally wrong. This is not me pitching for business, we decided it wasn't a market we wanted to get involved with...but please, if your existing accountant says "yeah, I'll give that a go", seriously consider whether you should stick with them for this purpose.

[SandyD]

Afternoon Guys,


What i'm considering is using my Contractor Co Limited Surplus funds (120k) and create an intercompany loan with a newly create SPV Limited Company.
Within this i will use the cash to purchase 2 or 3 houses via the SPV

Sorry how can you purchase 2 or 3 hourses with 120K??

[lifexplorer]

Sorry how can you purchase 2 or 3 hourses with 120K??

Presumably using the £120k as deposits for BTL mortgages (though if that's the case OP, be aware that there are a lot of fewer limited company BTL mortgage lenders, and processes for getting a mortgage could be a lot messier - get yourself a good broker!).

Alternatively, maybe he's buying in really cheap parts of the country - recently been contracting in the Northeast and it's amazing how cheap properties are compared to even the Midlands - much less London/SE.