£50K Interest Free Loan for 12 Months

[jamesbrown]

The only reason I can see for a contractor LtdCo using this loan is for personal funding(salary/dividends/directors loan). Our "companies" have hardly any cashflow requirements and anyone being furloughed now has the salary part covered anyway.

Unless I am missing something and contractors are using this loan in the same way SME's are?

Agree, and I think that is the expectation. Nothing wrong with it. Much better to use loan money than tax money.

[jamed]

You have absolutely no clue what you are doing do you? That's the daftest thing I've read in a long time. I don't even know where to start with that rubbish.

Well seeing as though you've known about this scheme and exactly how it works for a while now can you stipulate how you will use the bounce back loan in your LtdCo? Unless you actually have a traditional SME with high monthly expenses(rent/payroll) that you need to pay so the LtdCo doesn't go out of business and you can keep your staff employed?

[northernladuk]

Well seeing as though you've known about this scheme and exactly how it works for a while now can you stipulate how you will use the bounce back loan in your LtdCo? Unless you actually have a traditional SME with high monthly expenses(rent/payroll) that you need to pay so the LtdCo doesn't go out of business and you can keep your staff employed?

I have no problems with why a LTD company uses the loan. It's your grasp on dividends and DL's in your original statement that isn't great to say the least.

[jamed]

I have no problems with why a LTD company uses the loan. It's your grasp on dividends and DL's in your original statement that isn't great to say the least.

So you will use the loan to pay yourself a dividend and/or DL?

[jamed]

Agree, and I think that is the expectation. Nothing wrong with it. Much better to use loan money than tax money.

I just got the impression here that using the loan for personal funding was a no go and was only intended for use within the company.

[northernladuk]

So you will use the loan to pay yourself a dividend and/or DL?

No I won't. I will keep it in the company to top up my warchest. I had 5 months off last year so the warchest is a little thinner than I'd like it to be in these current circumstances. Whatever happens the very last thing I would be doing is buggering around with directors loans. Contrary to what you think DL's are not part of everyday business and paying them isn't supporting the business. It's the company doing the director a favour and IMO should be used very sparing and not as part of day to day business.

I just got the impression here that using the loan for personal funding was a no go and was only intended for use within the company.

Exactly. Well not quite 'within' the company.

Thanks for completely de-railing a good thread though.

[jamed]

No I won't. I will keep it in the company to top up my warchest. I had 5 months off last year so the warchest is a little thinner than I'd like it to be in these current circumstances. Whatever happens the very last thing I would be doing is buggering around with directors loans. Contrary to what you think DL's are not part of everyday business and paying them isn't supporting the business. It's the company doing the director a favour and IMO should be used very sparing and not as part of day to day business.



Exactly. Well not quite 'within' the company.

Thanks for completely de-railing a good thread though.

So you are topping up your warchest which is essentially just your business reserves that are available to be withdrawn(through salary/divi/DL) for personal reasons (and possibly future corp tax payments too) when/if the time comes.

Scenario: You have a big personal expense in the near future and need to use 10k of the business loan to fund it. If you take it out as a dividend you will probably incur tax on that, you will then need to repay it as a DL TO the company at a future date when you have to pay off the BB loan. If you are not trading at that time, possibly as there is no need due to IR35, then your business will have a loan which in theory won't be able to be settled. What do you do then?

[jamed]

Thanks for completely de-railing a good thread though.

Completely missed this useless remark of yours.

If you think this thread should not discuss how the loan can be used in the context of contractor's LtdCo's then you have missed the point completely.

Most contractor's are only considering this loan to fund themselves personally. You don't seem to understand that a "warchest" is what you use to fund your personal self in hard times.

[jamesbrown]

I just got the impression here that using the loan for personal funding was a no go and was only intended for use within the company.

Can't speak for others, but I think it's perfectly fine to use this loan to pay yourself a salary or dividend or take a DL (although the latter doesn't really make sense from a practical POV for a large amount). For a 1/2 person company, the main outgoing is going to be staff, regardless of employment status and mode of payment. That's just obvious.

Clearly, there's a risk that work won't pick up in the medium-term and you're then left with a loan to repay and no income. However, that is a much better scenario than spending tax money.

[elsergiovolador]

We could get together and pitch legal challenge against IR35 and perhaps launch a campaign for transparency - e.g. for the case when the Chancellor has not disclosed his ties to Infosys and I believe just because of that he should step down.
It could be a great use of those loans.