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Gains made using Directors Loan

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    Gains made using Directors Loan

    Morning all
    *I'll be sending this question to my accountant later but I'm interested to hear your views and/or experience in this

    Let's say I take a directors loan of 15k and then invest that in crypto. If that crypto gains 5k in value and is realised/sold, what position would that leave me (and my company) in in terms of tax obligations?

    If that 15k is repaid back to the company within the y/e + 9 months period, would that fulfill the reporting requirements on the company side?

    ...and the 5k gain, would that be classed as a capital gain to me personally that can be used against the capital gains free allowance?


    ​​​​​I have surplus funds in my company and trying to decide what's that best route to take to invest some of it in crypto:

    1. Directors Loan: buy as individual (as above)
    2. Loan to another company set up purely for crypto (I will be sole director/shareholder on both) and buy through the new company
    3. Buy the crypto through my current (IT contracting) company. ( Worried that the crypto trading would affect ER)
    4. Withdraw as dividend and invest personally (I think this would be least desirable route)

    Any thoughts much appreciated

    Thanks






    #2
    Others will comment on whether 2 or 3 are viable - my understanding is that they're not and will in fact cost you in higher tax.

    Option 1 vs 4 - you're trying to prevent the initial investment money being taxed, by betting on a positive ROI leveraging a loan. If you make a loss, you'll still need to take a dividend in order to pay off the loan.
    Down with racism. Long live miscegenation!

    Comment


      #3
      If you make a gain (not probable but possible) its your money so why would the company be involved. You pay back the DL in time to avoid interest charges and pay personal tax on the gain. That said, IANAA...

      If you're looking at a company tax avoidance manoeuvre, there are better options. Creating chains of transactions for no real business purpose is probably not advisable.
      Blog? What blog...?

      Comment


        #4
        I'd rather trade within the company than with a director loan. You have 2 risk trading with a loan:
        1. If you lose money, then you can't offset the loss against income but only against future capital gain. And not only that, you'd also have to repay your loan
        2. You are trading crypto (and not investing), and it's something HMRC check by asking how many buy/sell you've done for the gain when you fill your self assessment. If you are classified as trading, then you'll be subject to income tax on it.

        If you trade within your company, any gain will be subject to 19% corporation tax. But loss can be offset again profit, so it has its benefits.

        Comment


          #5
          Originally posted by cwah View Post
          I'd rather trade within the company than with a director loan. You have 2 risk trading with a loan:
          1. If you lose money, then you can't offset the loss against income but only against future capital gain. And not only that, you'd also have to repay your loan
          2. You are trading crypto (and not investing), and it's something HMRC check by asking how many buy/sell you've done for the gain when you fill your self assessment. If you are classified as trading, then you'll be subject to income tax on it.

          If you trade within your company, any gain will be subject to 19% corporation tax. But loss can be offset again profit, so it has its benefits.
          Are you 100% sure about that - as I wouldn't want to bet on it.
          merely at clientco for the entertainment

          Comment


            #6
            Originally posted by eek View Post

            Are you 100% sure about that - as I wouldn't want to bet on it.
            Actually I checked, it can only be offset against gain from the same activity:
            https://www.alchemyaccountancy.com/n...-stock-market/

            Well spotted

            Comment


              #7
              Originally posted by cwah View Post

              Actually I checked, it can only be offset against gain from the same activity:
              https://www.alchemyaccountancy.com/n...-stock-market/

              Well spotted
              No I just have a clue about things and do research before posting complete crap.

              Unlike others around here.
              merely at clientco for the entertainment

              Comment


                #8
                Originally posted by cwah View Post

                Actually I checked, it can only be offset against gain from the same activity:
                https://www.alchemyaccountancy.com/n...-stock-market/

                Well spotted
                We have to read any of your responses carefully as they tend to be utter tosh so not really 'well spotted'. Just basic fact checking that's needed on all your posts.
                'CUK forum personality of 2011 - Winner - Yes really!!!!

                Comment


                  #9
                  Any gain would be taxed on you personally - it would probably be treated as a capital gain for a one-off but be aware that regular trading in this way can be taxed as income.

                  If you pay the loan back before the year end + 9 months cut-off you won't need to pay the s455 tax charge however as the loan is above the £10k threshold for interest-free beneficial loans you will need to pay interest on the loan at HMRC rates or it will be taxed as a BIK. This interest will be taxable income for the company.

                  You should also be aware of the stricter "bed and breakfasting" test for repaying director loans - the threshold is £15k, but off the top of my head I can't remember if the stricter rules kick in at £15k or *above* £15k. In short, for amounts below this threshold, you need to wait 30 days before taking another loan otherwise it will be treated as an extension of the previous one and the s455 charge can still be applied. For amounts above this, there is no time limit - HMRC can potentially deem any subsequent loans as a continuation of the previous one if they think that's what you're doing.

                  Comment


                    #10
                    Originally posted by malvolio View Post

                    If you're looking at a company tax avoidance manoeuvre, there are better options.

                    I'm trying to go down the most tax efficient route. Can you share the other options please?

                    Comment

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