Reply to: Taking a loan from our Ltd company

[jenhanr]

Thanks guys for your help. We are eligible for some relocation expense claims so working through that and our loan may be less than initially thought which is a bonus. Cannot buy a new sofa through this though which is not such a bonus hah (don't worry, only jokingly upset).

Thanks also for not being too brutal at my first thread. Having spent a few days hoking round the forums, I have picked up a lot of tips and noticed a lot of things we're not doing completely as we should be. This place is a really useful tool and I will be back

Shakeholder sounds soooo much better btw!

[Martin at NixonWilliams]

Martin,

I assume that doesn't remove the responsibility to pay the advance corporation tax on the loan if it remains outstanding for 9 months after the year end?

I appreciate that the intent of the OP was to repay over 5-6 months so this situation should not arise - unless the OP fails to meet the repayment schedule. Potentially this could cause difficulties and perhaps declaration of dividend at the appropriate point to repay the loan may be more cost effective.

Of course if the loan falls outwith the requirements to account for CT on it because a fair rate of interest is paid then this (potential) issue doesn't arise.

Alternatively would it be possible to make the loan to the other person (assuming they are a non participator) as it is under £15k; though I imagine their are other difficulties with this. HMRC probably wanting to treat it as a loan to the director any way or needing a relevant licence under the cca to lend anyway.

That is correct, the section 455 tax surcharge would still be due on any loan outstanding 9 months after the company's yearend. It is worth noting that the surcharge can be reclaimed though - It is reclaimable 9 months after the accounting period in which the loan is repaid.

Loans to non-participators could provide a number of issues. As you mentioned, there is the likelihood of the need for a consumer credit license & HMRC could possibly treat the loan as being the director's if the person in receipt of the loan was connected. I have no doubt that HMRC would question the commercial purpose of the loan assuming if lending is not part of the company's trade.

[Martin at NixonWilliams]

you have to declare on P11d the loan which you are taking from your own company. Its a benefit. HMRC is always very keen in picking up Loans and related party transaction.

you don't have to declare the loan on the P11d if the interest is being paid to the company..

[ASB]

If you do not want the loan to affect your dividends or tax owed you will need to pay interest to the company.

Based on a loan of £13,000 for 6 months you would need to pay £260 (£13,000 x 4% x 6/12).

I hope this helps.

Martin,

I assume that doesn't remove the responsibility to pay the advance corporation tax on the loan if it remains outstanding for 9 months after the year end?

I appreciate that the intent of the OP was to repay over 5-6 months so this situation should not arise - unless the OP fails to meet the repayment schedule. Potentially this could cause difficulties and perhaps declaration of dividend at the appropriate point to repay the loan may be more cost effective.

Of course if the loan falls outwith the requirements to account for CT on it because a fair rate of interest is paid then this (potential) issue doesn't arise.

Alternatively would it be possible to make the loan to the other person (assuming they are a non participator) as it is under £15k; though I imagine their are other difficulties with this. HMRC probably wanting to treat it as a loan to the director any way or needing a relevant licence under the cca to lend anyway.

[northernladuk]

HTHBIDI

Ohhhhhhhhhh I seeeeeeee.. Fair cop LOL..

[TheFaQQer]

Might go the route of paying interest just to avoid going over the threshold and making things messy.

It's just that you said you might pay the tax like there was another option.

Uh, no she didn't.

HTHBIDI

[Contreras]

Oooooh yes she diiiiiid!

Never mind.

[Noni]

Are you a director?

you have to declare on P11d the loan which you are taking from your own company. Its a benefit. HMRC is always very keen in picking up Loans and related party transaction.

[Wanderer]

If there are two shakeholders, myself and husband, should we have documented the conversation we had over dinner?

Don't laugh! Some pretty big deals have been done over dinner. There are also plenty of cases of company directors holding a board meeting at the kebab shop on a Saturday night, declaring a dividend and making a withdrawal from the ATM next door.

Strictly speaking it's a legal requirement to have it minuted but there would only be a problem if one of the shareholders complained. Just write up the minutes of the meeting as "The shareholders unanimously agreed to advance a directors loan of £13,000 to (Director's name) and that the loan would be repayable on dd/mm/yyyy".

[northernladuk]

Uh, no she didn't.

Oooooh yes she diiiiiid!

but corrected by NW anyway..

[Contreras]

Wow yes thanks for all the help.

Might go the route of paying interest just to avoid going over the threshold and making things messy.

If there are two shakeholders, myself and husband, should we have documented the conversation we had over dinner?

Yes, if it's over 10k.

And !

It's just that you said you might pay the tax like there was another option.

Uh, no she didn't.

[Martin at NixonWilliams]

And what is your other option pray tell? Just take it out and put it back hoping no one will notice?

The other option would be to declare the benefit in kind on the P11d, but this is usually more expensive!

In the rare circumstance that the P11d option is cheaper, most opt to pay the interest instead anyway as it removes the need to declare the loan on the P11d and doesn't complicate the calculation for determining how much of your basic rate threshold remains etc.

[northernladuk]

Uhhh no.

If I knew exactly what I was doing, I wouldn't have to ask here. Thanks for the help.

It's just that you said you might pay the tax like there was another option.

If you discussed it over dinner then claim it as a business expense

[jenhanr]

And what is your other option pray tell? Just take it out and put it back hoping no one will notice?

Uhhh no.

If I knew exactly what I was doing, I wouldn't have to ask here. Thanks for the help.

[northernladuk]

Might go the route of paying interest just to avoid going over the threshold and making things messy.

And what is your other option pray tell? Just take it out and put it back hoping no one will notice?