Loan the money in business account

**northernladuk** · 16 March 2011, 15:56

Originally posted by tyut4669 View Post

I have close to 50k in the business account which is not earning a great deal of interest. One of my friend is going to a bank for a personal loan.

From the business perspective, it makes sense for me to lend the money in the business to my friend at a little lower interest than what bank offers. It is a win win for both my friend, me and my business.

Can someone comment on the legality of doing such a thing?

Never mix business and pleasure.

If your friend defauls on your loan and you can't make your books balance you will be held responsible. is that a risk you are willing to take to save your friend a few percent interest. Does he realise this. I bet he doesn't.

Nightmare of an idea. Walk away from it IMO.

**TheFaQQer** · 16 March 2011, 16:16

Theoretically, I don't think there is any limit. However, if this were to be the major source of income, then you need to change your company details with Co. House.

You might also need to be registered with the FSA?

I'd not mix business and pleasure, to be honest - it's more hassle than it's worth.

**dynamicsaxcontractor** · 16 March 2011, 16:32

Originally posted by tyut4669 View Post

I have close to 50k in the business account which is not earning a great deal of interest. One of my friend is going to a bank for a personal loan.

From the business perspective, it makes sense for me to lend the money in the business to my friend at a little lower interest than what bank offers. It is a win win for both my friend, me and my business.

Can someone comment on the legality of doing such a thing?

As the others say, its sounds like a crazy stupid idea. However, if its a really good mate bla bla bla - get it out as a directors loan and then lend him the money personally with whatever things you can agree between yourselves.

**TheFaQQer** · 16 March 2011, 16:43

Originally posted by dynamicsaxcontractor View Post

As the others say, its sounds like a crazy stupid idea. However, if its a really good mate bla bla bla - get it out as a directors loan and then lend him the money personally with whatever things you can agree between yourselves.

Don't directors loans need to be repaid or you end up paying tax as a BIK?

**GillsMan** · 16 March 2011, 16:45

As someone else said, I'd have thought you'd need to be FSA registered to provide credit or something like that. Fairly sure there'd be a whole load of legal loopholes to jump through which wouldn't be worthwhile for a one-off loan. No way would I go near this idea IMO.

**tyut4669** · 16 March 2011, 17:08

Thanks for all the replies. I appreciate all your time.

May I ask you, in an instance where I am need of money and going for a personal loan, can I take the loan from business and repay with interest.

**northernladuk** · 16 March 2011, 17:29

Originally posted by tyut4669 View Post

Thanks for all the replies. I appreciate all your time.

May I ask you, in an instance where I am need of money and going for a personal loan, can I take the loan from business and repay with interest.

Ahh, the 'friend' has disappeared all of a sudden. Now we are getting to the nitty gritty of it.

<IGNORE THIS BIT>You can give yourself a directors loan of 5k a year without penalty but it must be paid back to the company by the end of the financial period. You cannot however just pay it back one day and take it back out the next for the next year ad infinitum. This is naughty.
Any amount over that is going to incurr some Benefit In Kind charges which generally makes it not worth doing.</IGNORE THIS BIT>

I can't find the post that mentioned end to end directors loans are bad so withdraw the comment. I have posted other stuff about directors loans I have found that might help though

**Platypus** · 16 March 2011, 17:35

Originally posted by northernladuk View Post

You cannot however just pay it back one day and take it back out the next for the next year ad infinitum. This is naughty.

Hi NLUK, have you any links for this assertion?

I thought it was ok to do just that.

**northernladuk** · 16 March 2011, 17:38

Originally posted by Platypus View Post

Hi NLUK, have you any links for this assertion?

I thought it was ok to do just that.

Erm, no unfortuanately. I just remember it being mentioned in other similar posts like this. Common sense kinda dictates the idea of paying it back wasn't just to pull it out a day later but then HMRC and common sense don't seem to belong in the same sentence.

Let me see if I can find a comment that relates to my wild assumption.

Loan the money in business account