Director loan to company

[AladdinElsonba]

Context: I have set up LTD to buy and rent properties for residential use. I paid £218,277.93 and mortgages £264,000 over no more than 7 years term, I spent Initial upgrading and maintenance expenses of £50,000. I will pay any short falling from my pocket (being the director). Property is already purchased and rented out last month.

Q1- can I set a director loan now to address all expenses I endure for initial property purchase, refurbishment and future mortgage contributions (218,277.93 +50,000+264,000) given that the purchase process already done and property is not rented out last month.

Q2-If not possible what cost I can include in Director Loan Agreement

 

[DWS]

Did you not get professional advice before the purchase?
Why a Ltd Company?
And why a Ltd Co if it was you who paid? What name is the property in, yours or the Company?

 

[AladdinElsonba]

thanks for your reply, No, I did not ask a professional directly just my study into the subject, however, reason to purchase in the name of LTD is it is more income-tax efficient and inheritance-tax efficient, I work abroad, non UK tax resident and my foreign income cause me to pay highest tax rate on my UK income. beside I can return to the UK and be a tax resident and also pay high tax rate, so I choose corporate tax rate than income tax rate beside I can take money out of company in different forms with less tax rates.
The property is purchased in the name of the LTD ( myself as share holder and director, so do my wife)
my question about DLA is another way of getting money I paid to company paid back to myself (0 interest) with no tax impact.

 

[DWS]

In the short term, yes you may pay less tax on the rental income but long term there is now a property that does not belong to you it belongs to the Company !
Have you considered an exit plan?
If you lent the Company money to purchase the property then yes you can withdraw this free of tax.
Another thing to be aware of is that only some of the expenditure may be allowed, it could be that some of the improvements/upgrades are Capital expenditure not Revenue.

 

[AladdinElsonba]

So, can I register to company house now a Director Loan Agreement after I purchased the property and include my contribution to the initial purchase and refurbishment (this is like after event to me and I am in doubt of doing so)

 

[DWS]

So, can I register to company house now a Director Loan Agreement after I purchased the property and include my contribution to the initial purchase and refurbishment (this is like after event to me and I am in doubt of doing so)

You don’t need to do anything with CH it has nothing to do with them!
You keep saying ‘I’ purchased the property but also say it is in the Ltd Companies name!
Who purchased the property, you or the Company?

 

[AladdinElsonba]

The company purchased the property, I paid into the company account for this purchase. this payment is not yet recorded as initial investment nor director loan to company

 

[GLAbusiness]

Your first mistake was to start up without professional advice.

The next mistake (which you can avoid) would be to continue without professional advice.

You need to sort out your bookkeeping and processes, which requires more knowledge than you demonstrated in your post.

Get things organised as soon as you can, and I hope 2025 is successful for you.

 

[Bobbo]

What do you mean by "future mortgage contributions"?

 

[Daybooks]

The company purchased the property, I paid into the company account for this purchase. this payment is not yet recorded as initial investment nor director loan to company

If you paid money into the business bank account in order to fund that then that has to be recorded in your account in the manner it was given for. Failing any specific arrangement that would as a director loan.

You can convert it to some form of investment with payable interest if you wished. Repaying your principal loan ( or investment) would not be income giving rise to any tax charge.

Any interest you paid yourself on the loans would be subject to income taxes.

The preparation of your annual accounts will crystallise “what is what” but I would suggest not doing it alone.

 

[GLAbusiness]

OP, It is not clear from your original post how the mortgage was organised. The nightmare scenario is:

1. You took out a personal mortgage using the property you intended to buy as collateral
2. You loaned this money to the Ltd company, along with some of your own funds
3. The company then bought the property

If this is what happened you now have a personal mortgage with no property to back it up. This is because the company owns the property but you are personally at risk for the mortgage. You and the company are completely separate legal entities.

We don't know if this is what you did. If it is then you really need professional help to untangle the mess.

If I misread your post then apologies

 

[AladdinElsonba]

If you paid money into the business bank account in order to fund that then that has to be recorded in your account in the manner it was given for. Failing any specific arrangement that would as a director loan.

You can convert it to some form of investment with payable interest if you wished. Repaying your principal loan ( or investment) would not be income giving rise to any tax charge.

Any interest you paid yourself on the loans would be subject to income taxes.

The preparation of your annual accounts will crystallise “what is what” but I would suggest not doing it alone.

thanks a lot for your advice, appreciate it

 

[MyAccountantOnline]

The company purchased the property, I paid into the company account for this purchase. this payment is not yet recorded as initial investment nor director loan to company

In that case you need to create a directors loan account showing the amount you've lent your company and show the puchase of the property in the company records.