Avoiding CT on loans

[xoggoth]

Well, not on loans exactly but on profits made before significant loans by a director are repaid.

My sister wants our tiny company to provide an expensive product but as it does not have the money to produce it she will provide the finance. As I understand it, we could deduct interest paid to her as an expense (which would be taxable anyway) but not repayment of the principal, that is just a creditor thing.

Seems unreasonable to start paying CT on these profits before the firm has even repaid the capital so any legal ways round it? Not a a contracting thing I know but you lot know some wierd stuff.

Ta for any ideas

[Alfie]

The problem is that the original loan is not an expense, it's a balance sheet transfer from creditors to bank. Therefore when you get additional profit there's no expense to offset it against.

In theory you're still keeping 79% of the new profit anyway, so part of the loan can still be repaid.

Also bear in mind that the interest paid on the loan will be taxable income on a personal level.

[xoggoth]

Cheers, Alfie that's what I understand but was hoping for some wizard cunning wheeze. I suspect there isn't one.

The tax system is basically bizarre that one can work one's butt off, make no money whatever and then get taxed on it.

[Pickle2]

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The tax system is basically bizarre that one can work one's butt off, make no money whatever and then get taxed on it.

Its not just the tax system thats bizarre about that statement!