Reply to: Directors Loan query

[craigy1874]

Because the spouse is a shareholder and is entitled to take a loan subject to agreement by all relevant parties and the usual rules regarding participator loans. Read the rest of the thread.

https://www.whitefieldtax.co.uk/help...-shareholders/

Yes, they are perfectly entitled to take a loan, I am not arguing that point. I am arguing who the benefit in kind should be charged on.

In my eyes, the shareholder is only getting a loan because they are the spouse of the fee-earning director. This to me means that the loans should be aggregated for BIK purposes and tax charged accordingly.

[TheCyclingProgrammer]

I would say making loans to a spouse who isn't a director, means the loan is assessed on the spouse who is a director.

How can you possibly justify a benefit in kind for a non-director spouse? I mean you wouldn't give your non-director spouse a company car and expect them to incur the taxable benefit, so why would a loan be any different?

Because the spouse is a shareholder and is entitled to take a loan subject to agreement by all relevant parties and the usual rules regarding participator loans. Read the rest of the thread.

https://www.whitefieldtax.co.uk/help...-shareholders/

[craigy1874]

I would say making loans to a spouse who isn't a director, means the loan is assessed on the spouse who is a director.

How can you possibly justify a benefit in kind for a non-director spouse? I mean you wouldn't give your non-director spouse a company car and expect them to incur the taxable benefit, so why would a loan be any different?

[Gomez]

You can make a short term loan to a shareholder. All of the usual rules apply just the same.

https://www.accountingweb.co.uk/any-...or-shareholder

A “participator” may be a company officer or shareholder.

As I mentioned earlier, I’d be very careful about using loans to yourself and a spouse as a way of dodging bed and breakfasting rules as I suspect HMRC would successfully challenge this.

Many thanks for this. It seems that 'Bed and Breakfasting' is the practice of taking a loan, repaying it and then taking it out again. This is not my intention. It would be purely to take it out as a one off and pay it back asap. On this basis, you appear to be saying it is OK (I will of course check with my accountant :-)). Of course, personal circumstances can change and I appreciate that the taking of loans is not generally a good idea.

[TheCyclingProgrammer]

You can make a short term loan to a shareholder. All of the usual rules apply just the same.

https://www.accountingweb.co.uk/any-...or-shareholder

A “participator” may be a company officer or shareholder.

As I mentioned earlier, I’d be very careful about using loans to yourself and a spouse as a way of dodging bed and breakfasting rules as I suspect HMRC would successfully challenge this.

[Gomez]

Erm.. A DIRECTORS loan to someone who's NOT a director???

No. I should have made that clearer. It would be a "loan to participators" as the CyclingProgrammer pointed out earlier in the thread.

[northernladuk]

Reading this whole thread with interest. I'd like to make a loan to my spouse who is also a shareholder but not a director. My accountant seems to think there will be BIK and NI issues doing this even if the loan is for under £10k. The loan would be paid off within 9 months of the company year end. Has my accountantant got it wrong? I should also add that I intend to also take a directors loan in addition to this which would also not exceed £10k and be paid back within the 9 months.

Erm.. A DIRECTORS loan to someone who's NOT a director???

This type of loan is discussed from time to time including here..

https://forums.contractoruk.com/acco...tors-loan.html

General advice is don't.

[Gomez]

Reading this whole thread with interest. I'd like to make a loan to my spouse who is also a shareholder but not a director. My accountant seems to think there will be BIK and NI issues doing this even if the loan is for under £10k. The loan would be paid off within 9 months of the company year end. Has my accountantant got it wrong? I should also add that I intend to also take a directors loan in addition to this which would also not exceed £10k and be paid back within the 9 months.

[TheCyclingProgrammer]

read this thread and yesterday and immediately called the accountant, turns out er-in-doors can also take a directors loan )

much needed monies for the house fund

I'm assuming she's a shareholder or company officer in her own right, otherwise any loan to her would probably be treated as a loan to you for the purposes of the BIK limit.

If she is then don't forget you still need to repay these loans within 9 months of your company year end or you'll have tax repercussions. A director's loan can be useful for getting access to some money in advance of actually declaring a dividend but it is only kicking the can up the road as far as tax goes...

[northernladuk]

read this thread and yesterday and immediately called the accountant, turns out er-in-doors can also take a directors loan )

much needed monies for the house fund

Any chance you can splash out on one of these as well?

[filthy1980]

read this thread and yesterday and immediately called the accountant, turns out er-in-doors can also take a directors loan )

much needed monies for the house fund

[ukltdcon]

Thanks for the advice, it's the first time I've used directors loans as it can be useful for cash flow for example to optimise dividend tax by waiting till after April to issue another dividend, if your YE falls after this e.g mine in June. However does seem to be a bit of a grey area so will seek advice from an accountant.

[northernladuk]

I was tempted but did not.

Have crazy ideas - come on here - somebody points out the "stupidity" of my suggestion and I take their advice.

So three shareholders?

[FMCG]

EDIT : Oh dear, your kids...... You didn't did you?

http://forums.contractoruk.com/accou...eholder-s.html

I was tempted but did not.

Have crazy ideas - come on here - somebody points out the "stupidity" of my suggestion and I take their advice.

[northernladuk]

May I ask..........

If 1x Director (55% shareholding) with additional 3x shareholders (each with 15%) (technically known as "loans to participators" - thanks to TheCyclingProgrammer), would they each be able to borrow upto £9,500/each ie totaling £38K.

Intention to repay within 9 months of year end and not re-borrow.

3 Shareholders? That you are willing to lend 10k to without paperwork? Must be friends or family which is an issue.

What are they going to do with the money? Are you going to pool it to invest which would indicate funds all going to you which is another massive problem?

I think you need to look at your situation in much more detail than just a simple question like that IMO. The answer might be legally correct but the reality could open up a world of problems if you push it too far.

EDIT : Oh dear, your kids...... You didn't did you?

http://forums.contractoruk.com/accou...eholder-s.html