Inter company loan / transfer

Discussion in 'Accounts & Finance' started by sanjiv, Mar 2, 2018.

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  1. sanjiv

    sanjiv UKBF Legend

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    Hey guys,

    I've got two businesses set up, both limited companies. One is a trading business and the other is a property investment company. The trading business has some surplus funds which I am looking to use to purchase property through the investment company.

    Ideally I would like to be able to simply gift the funds from the trading company to the investment company, however I don't know the mechanics of how this could work, since we don't have a group structure in place. The other option would be to provide an unsecured loan, however I am not sure if this needs to be on any sort of commercial terms or a simple open ended IOU between the companies would be acceptable.

    The companies both have the same directors and there are four shareholders, however the actual % holdings are slightly different. The trading co is 85%/5%/5%/5% and the investment co is 25% each. As shareholders we are not concerned about shifts in values between shareholders, as we are a close family.

    Any help would be much appreciated :)
    Posted: Mar 2, 2018 By: sanjiv Member since: Feb 15, 2010
  2. Scalloway

    Scalloway UKBF Legend

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    Posted: Mar 3, 2018 By: Scalloway Member since: Jun 6, 2010
  3. Adam93

    Adam93 UKBF Enthusiast

    402 88
    To avoid any doubt, I would go with a loan at a commercial rate of interest.

    A gift would be taxable in the company of receipt, and not tax deductible in the company making the gift.

    If the trading company was to make a loan this would be considered an investment meaning potentially losing entrepreneurs relief and bpr. You should consider the whole picture, not just the one transaction.

    The best advice would be to go and see your accountant/tax adviser.

    How long has the investment co been running? And have you ever transferred the shares around or have they always been 25% each?
    Posted: Mar 3, 2018 By: Adam93 Member since: Jan 18, 2018
  4. sanjiv

    sanjiv UKBF Legend

    2,116 248
    Thanks for your reply. I think this is a slightly different scenario to what I'm looking to do but useful read!

    Thanks, the loan at commercial rate I know would be perfectly acceptable. Would my trading business still be good for BPR if I am providing loans on commercial terms to my investment co as surplus funds arise? Whether or not interest is charged or not doesn't make too much difference to me, as I will probably be looking to make further loans in the future, as profits arise.

    We don't want to lose BPR. Our accountants will be advising on this, but I understand it may be a bit of a grey area so useful to get ideas so that a constructive discussion can be had.

    Investment co has been running 2 years and the share allocations haven't changed. Funding has been solely through shareholder loans to the company.
    Posted: Mar 3, 2018 By: sanjiv Member since: Feb 15, 2010
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