Originally posted by Lance
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Does the company have to have retained profits to loan money?
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Originally posted by cannon999 View PostIf I had that much cash in the company, I would definitely do that.. unfortunately I have already spent it all on hookers and blowSee You Next TuesdayComment
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Originally posted by cannon999 View PostI know that it is not legal to issue dividends unless you do so from retained profits.
However I am in a situation currently where I am a little short (~9k or so) from the house deposit and I would rather not sell any shares to get there (as they were bought at attractive prices during the dips).
I am planning to issue dividends this month after which there will be cash left in the company account (which is last years corp tax + VAT). Can I loan myself the 9k? I am still in contract so the shortfall would be accummulated back within a month or so. There would be no issue with paying VAT or corp tax later down the line.Comment
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Originally posted by Lance View PostYes that is a lot of reading.
2.5% isn’t that bad though when it’s going to a company I own.Comment
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Originally posted by northernladuk View PostCorrect but it's creating a commercial loan rather than a directors loan in which case it can go on for as long as he wants. A directors loan has to be paid 9 months after the current tax year he's in.Comment
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Originally posted by TheCyclingProgrammer View PostI’m pretty certain this would not magically make it a “commercial loan”, certainly not one that would avoid a s455 charge. It’s still a directors loan.
Just too easy to take the money out in one go, pay off the interest only at commercial rates (that prevents compounding) and use future 'paper only' dividends to pay off the capital. It's why director loans are treated differently as preferential loans.
IANAL IANAASee You Next TuesdayComment
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Indeed, the s455 tax (or charge) is a tax on loans to participators in close companies and the story pretty much ends there. There are very limited exclusions, but commercial terms are completely orthogonal to the question of the s455 tax. Commercial terms may avoid the individual paying additional tax, but they will not avoid the s455 tax on the company.Comment
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Originally posted by Lance View PostThat's what I thought. The fact that it seems "too good to be true" being a key indicator.
Just too easy to take the money out in one go, pay off the interest only at commercial rates (that prevents compounding) and use future 'paper only' dividends to pay off the capital. It's why director loans are treated differently as preferential loans.
IANAL IANAA
Its not uncommon for close companies to provide longer term loans to their directors in this way - the fact that s455 charges get repaid when the loan is repaid is an acknowledgment of the fact that not everyone who takes directors loans is trying to avoid paying tax. Whether or not its sensible really depends on the circumstances.
AFAIK the only time an s455 charge could be avoided is if the company was in the business of providing commercial loans, was regulated as such and was not a close company - in this case it could of course provide a commercial loan to its director, but that wouldn't apply to anyone here.Comment
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