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Previously on "LtdCo lending secured on property"

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  • northernladuk
    replied
    Originally posted by Jessica@WhiteFieldTax View Post
    Ramsay (W T Ramsay Ltd v Inland Revenue Commissioners [1981] to give it its full name) would seal the fate on that one very quickly.
    I am talking a proper loan at market rates for marginal gain. Not a scam loan... but anyway irrelvant now.

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  • Jessica@WhiteFieldTax
    replied
    Originally posted by northernladuk View Post
    Oh bugger, will delete my comment then as it appears it is utterly wrong... Just have to wait for someone to post about lending it to a friend not related to the business and resurrect it...
    Ramsay (W T Ramsay Ltd v Inland Revenue Commissioners [1981] to give it its full name) would seal the fate on that one very quickly.

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  • northernladuk
    replied
    Originally posted by Jessica@WhiteFieldTax View Post
    Technically S455 is about loans to shareholders rather than directors anyway. So, makes no difference.
    Oh bugger, will delete my comment then as it appears it is utterly wrong... Just have to wait for someone to post about lending it to a friend not related to the business and resurrect it...

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  • Jessica@WhiteFieldTax
    replied
    Originally posted by eek View Post
    I'm not trying to be awkward here but what about leading it to a shareholder that is not a director?
    Technically S455 is about loans to shareholders rather than directors anyway. So, makes no difference.

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  • Wanderer
    replied
    Originally posted by eek View Post
    I'm not trying to be awkward here but what about leading it to a shareholder that is not a director?
    Not much different, I'm afraid.

    It comes under the umbrella heading of Close companies: loans to participators or their associates so that catches you, your spouse, your kids, your parents, your dog etc under pretty much the same rules as far as I can tell. Their definition of a participator is defined doesn't actually define what an associate is as far as I can see.

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  • eek
    replied
    I'm not trying to be awkward here but what about leading it to a shareholder that is not a director?

    Leave a comment:


  • Wanderer
    replied
    Originally posted by professor View Post
    the company could give a secured loan to anybody, does it still get classified as a 'director's loan'?
    It's called a "director's loan" because it's a "loan to the director". Your company is free to loan money to a non-connected person on commercial terms if it sees fit. But you don't want to do this, do you? See, a director has a special status and HMRC recognise that.

    Originally posted by professor View Post
    ...and that leads to another question why would HMRC keep 25% without interest for the duration of the loan ?
    Sorry to say it but the S455 charge is to discourage people from doing exactly what you (and lots of other folks here) want to do!

    It may still be worth doing though. If you had (say) £125k retained in your company, you could borrow £100k and then put aside £25k for the S455 charge. I think they may even refund the S455 charge with interest so you should check this. Definitely get professional advice before proceeding with this one.

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  • professor
    replied
    "Yes, it's possible, subject to the S455 and BIK issues"

    Thank you for the responses. As this is clearly a secured investment, and the company could give such a secured loan to anybody, does it still get classified as a 'director's loan'?...and that leads to another question why would HMRC keep 25% without interest for the duration of the loan ?

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  • Jessica@WhiteFieldTax
    replied
    [QUOTE=Wanderer;1689362]I don't know if it's ever happened but I've read that without shareholder approval HMRC could seek to challenge the loan saying it was a dividend, or worse still, salary.[QUOTE]

    Urban myth: I've never seem HMRC take the point.

    Originally posted by Wanderer View Post
    There's some ideas, it's probably time to get some professional advice now.
    Good idea

    Yes, it's possible, subject to the S455 and BIK issues, so long as someone goes into it with their eyes open.

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  • Wanderer
    replied
    Originally posted by northernladuk View Post
    a charge of 25% of the loan amount is payable, often called the S455 charge
    Hmm, what if you had (say) £125k in the company account and you borrowed £100k and kept £25k for the S455 charge. There would be no BIK if you paid interest (currently 4%) and that money becomes company profit so 80% of it (less if you are a higher rate tax payer) comes straight back to you. Effectively a 1% loan, though you will tie up 25% of your capital with the S455 charge. Note that HMRC will only pay back the 25% tax nine months and 1 day after the end of the accounting period in which the loan is repaid so they can pull your chain with that one if they want to. However, if HMRC return this money with interest and you aren't going to draw the money from the company in the long term anyway then it may not be so bad.

    Also, if your director's loan is over £10,000 then it needs approval from the shareholders. This should be as simple as having a board meeting and pass a resolution that the director can take a loan of £x amount, writing up the meeting minutes and file them away somewhere safe. I don't know if it's ever happened but I've read that without shareholder approval HMRC could seek to challenge the loan saying it was a dividend, or worse still, salary.

    If you have a lot of money retained in the company then you may be able to do a Members Voluntary Liquidation. I'm sure there are lots of places that do these if you google it, but Maslins seems to have taken a lead on providing a low cost option £995+VAT "plus disbursements for advertising and bonding".

    There's some ideas, it's probably time to get some professional advice now.

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  • northernladuk
    replied
    You don't want any property in the company name, it isn't worth doing for a host of reasons.

    Keep the company money and your personal investments separate.

    Use the search I linked above to look for BTL and LTD as well. That has been covered numerous times also.

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  • northernladuk
    replied
    You are forgetting S455 of the Corporation Tax Act 2010...

    The catch is that if the loan is outstanding 9 months and 1 day after the company year end, then a charge of 25% of the loan amount is payable, often called the S455 charge. This charge is refundable once the loan is repaid, but this doesn't happen immediately on repayment of the loan so it represents a major stumbling block and it was deliberately designed to prevent directors taking long term loans.

    Ripped from Wanderers post here..

    http://forums.contractoruk.com/accou...an-my-ltd.html

    Many other threads on this here

    LTD Loan site:forums.contractoruk.com/accounting-legal - Google Search

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  • professor
    started a topic LtdCo lending secured on property

    LtdCo lending secured on property

    Can the LtdCo lend money long term, with interest charged say 4%, with the director's second property mortgaged to the LtdCo ?

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