Reply to: Buying a Property question

[TheCyclingProgrammer]

I didnt realise you got the tax refunded when you repay the loan. Obviously makes a huge difference.

Suspect accountants tell you not to bother as its more work for them

Yes. There's nothing wrong with taking director loans over longer periods of time. The charge is there to stop directors taking big loans and never paying them back.

[Murder1]

EDIT: with Osbourne's tax rape on individual BTL owners, you might want to research buying the property entirely under the company name. This is more for future-proofing under a more efficient tax shelter, but depends on your long term plan with regards to property.

How ironic that this "might" be the better option going forwards when the consensus has historically been to take the money out of the business and buy it personally.

[No2politics]

I'm aware of that, but like I said if YourCo has significant cash reserves it shouldn't have any effect on your cashflow. They money will be re-paid 9 months after the tax year in which the loan is re-paid. As long as you're aware of that then its not necessarily a big deal.

Assuming cashflow isn't an issue then the most important thing to watch out for is paying the correct amount of interest (or BIK tax, but interest is the best approach I think) on the loan if over £10k and I believe that strictly speaking a shareholders meeting is required for loans in excess of £15k (but a rather trivial point for a one man or family owned business).

I didnt realise you got the tax refunded when you repay the loan. Obviously makes a huge difference.

Suspect accountants tell you not to bother as its more work for them

[SandyD]

You know what, forget it.

I asked a question here as I thought I'd get some professional respectable answers and advice.

Forget it.

:

[TheCyclingProgrammer]

Not sure I'd advise paying s455: it's 25% of the loan amount which can be a substantial sum, and won't prove easy/quick to get back from HMRC.

I'm aware of that, but like I said if YourCo has significant cash reserves it shouldn't have any effect on your cashflow. They money will be re-paid 9 months after the tax year in which the loan is re-paid. As long as you're aware of that then its not necessarily a big deal.

Assuming cashflow isn't an issue then the most important thing to watch out for is paying the correct amount of interest (or BIK tax, but interest is the best approach I think) on the loan if over £10k and I believe that strictly speaking a shareholders meeting is required for loans in excess of £15k (but a rather trivial point for a one man or family owned business).

[ChimpMaster]

You don't have to pay it back in that timeframe if you've got enough cash in the company to cover the s455 tax. You'll get the money back eventually once the loan is repaid.

Not sure I'd advise paying s455: it's 25% of the loan amount which can be a substantial sum, and won't prove easy/quick to get back from HMRC.

Best to only take a loan amount that you know you can repay before 9 months past the company year-end date.

[TheCyclingProgrammer]

So you buy the property personaly using a directors loan. What happens after 9 months after company year end when u need to pay it back and your money is locked away?

You don't have to pay it back in that timeframe if you've got enough cash in the company to cover the s455 tax. You'll get the money back eventually once the loan is repaid.

[No2politics]

You can take a director's loan and pay 3% interest to your Ltd to avoid BIK. Buy the property in your personal name. Then repay the loan with rental income or an equity release (if you're adding value to the property. You can only release equity after 6 months ownership) or with dividends taken out (if planned carefully) at basic rate tax level this FY and next FY.

Note that director's loan has to be re-paid within a very strict timeframe, else you are liable to 25% tax on the loan amount.

See https://www.gov.uk/directors-loans/y...-company-money.

BTW I have done this.

EDIT: with Osbourne's tax rape on individual BTL owners, you might want to research buying the property entirely under the company name. This is more for future-proofing under a more efficient tax shelter, but depends on your long term plan with regards to property.

So you buy the property personaly using a directors loan. What happens after 9 months after company year end when u need to pay it back and your money is locked away?

[mudskipper]

You posted your question on Saturday morning. If you hang around, you might get some sensible answers when the proper accountants get back to work in the morning.

[northernladuk]

You know what, forget it.

I asked a question here as I thought I'd get some professional respectable answers and advice. Instead I get a load of IT geeks who have nothing better to do than troll the internet as they don't have any lives themselves to be getting on with.

Forget it.

To be fair you did get some respectable advice, maybe not all of it but some

[PerfectStorm]

Am I reading right, that if you've maxed out this year's dividends but still need to take a large sum out for a deposit, is it best to take it out before April or always defer?

[Scruff]

That was a quick Flounce? I'm quite happy to be an IT Geek, who also happens to be a Beancounter... In a previous life of course. I'm not a Troll, however, since they live under bridges in Norway.

[stek]

Thanks.

I'm a qualified accountant, so wont be messing up.

However I'm just exploring what's the most efficient way to do this. Directors loans do not sound the way forward. And it looks like there are more reliefs and allowances available to Individuals rather than companies, despite the company being cash rich.

Chartered, Certified or Cost?

[seeourbee]

You know what, forget it.

I asked a question here as I thought I'd get some professional respectable answers and advice. Instead I get a load of IT geeks who have nothing better to do than troll the internet as they don't have any lives themselves to be getting on with.

Forget it.

[kaiser78]

Hi,

So I have a large amount of cash sat in my limited company (I am a contractor). I would like to buy a small property and use this as the deposit. If I withdraw the lump sum as a dividend I will incur income tax at 32.5% on my person (net 22.5%). So can I then use the the company's cash to make the deposit directly, i.e. the company becomes part owner of the property ? That's not the activities of the company of course, so it is ok ?
Secondly, what about making a non-interest bearing Directors loan account for the same amount to my person. My person then uses this as a deposit for the property as normal.
Any advice welcomed ! Thanks

Thanks.

I'm a qualified accountant, so wont be messing up.

However I'm just exploring what's the most efficient way to do this. Directors loans do not sound the way forward. And it looks like there are more reliefs and allowances available to Individuals rather than companies, despite the company being cash rich.

This is confusing/worrying - aren't these basic accounting principles that are being raised here, whereas even though you may not be a specialist contractor accountant, any field of accounting should be versed with these principles ?