Tax issue regarding a Personal Loan to my Ltd company?

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Busmania

Free Member
Sep 6, 2007
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  • #1
    Hi, hope someone out there can answer this query.

    My bank, tight as they are, are only lending me £4000 as a start up loan for my Ltd company.

    I have already put in £5000 of my own money. I will now need to take out a personal loan of £11,000 to make the business happen.

    My question is twofold:- If I loan the company this £11,000 now, then in 6 months can I pay it back in full without it showing as income tax?...and in the meantime can the company pay me the amount that I require to meet the personal loan repayments without it showing as income?

    Maybe i'm being somewhat naive here but I want to keep this situation and my salary seperate, especially as my salary will take me right up to the 40% boundary.

    If i'm not making sense or you need a bit more info to answer this then please don't hesitate to tell me.
     
    DFL

    DFL

    Free Member
    Aug 21, 2007
    1,036
    334
    Essex
  • #2
    Busmania said:
    Hi, hope someone out there can answer this query.

    My bank, tight as they are, are only lending me £4000 as a start up loan for my Ltd company.

    I have already put in £5000 of my own money. I will now need to take out a personal loan of £11,000 to make the business happen.

    My question is twofold:- If I loan the company this £11,000 now, then in 6 months can I pay it back in full without it showing as income tax?...and in the meantime can the company pay me the amount that I require to meet the personal loan repayments without it showing as income?

    Maybe i'm being somewhat naive here but I want to keep this situation and my salary seperate, especially as my salary will take me right up to the 40% boundary.

    If i'm not making sense or you need a bit more info to answer this then please don't hesitate to tell me.
    Click to expand...

    There are no tax implications for taking back the money the company owes you. With regard to the interest, the company will get a tax deduction for the interest paid to you. You as an individual will declare the interest received but will treat this as a charge on income and not pay any additional tax providing it is a qualifying loan. Only interest paid in the year of the loan and the next three years will qualify for tax relief.

    What is the purpose of the loan?
     
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    A

    a.dickson

  • #4
    Am I right in thinking that personal Income tax and Corporation tax can be avoided by loaning one's own Co. money and then recouping them?

    I am planning to loan a substantial sum to my Co. to buy business premises.
    I believe I can charge the interest on the loan against my personal income tax?

    Can I transfer income from the Co. direct to myself free of corporation tax as repayment of the loan?
    If so I could loan the Co. £100k and the first 100k of corporate earnings - transferred back to me - would be free of income tax and corportation tax.

    Advice appreciated.
     
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    GillespieBS

    GillespieBS

    Free Member
    Apr 11, 2008
    349
    52
    Bristol/Bath
  • #5
    A.dickson - yes you can loan your company cash and recoup it with no effect on your (or the company's taxable income). It's not really a tax dodge because you won't get any tax relief from loaning the money in the first place. If you think about it as if it was someone else lending the business the money, why would they do this if they have to pay tax on the repayments.

    Busmania -I presume you looked into other sources of finance. HP etc. Was it a lack of robust forecasting or proof of the ability to earn and repay the debt that prevented the loan being provded by the bank. You are commiting yourself to a consideable amount of finance and must be confident that you can repay which says to me that a bank could have put more up themselves if presented in the right way. How much would you have been prepared to pay an adviser to secure you, say, another £5k?
     
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