How to make the most from money in company bank account?

[prozak]

did anyone get to the bottom of this or did it die?

[DaveB]

No idea but the one thing that strikes me about it is that you would end up paying BIK on the interest saved on the mortgage as that is where the benefit to you arises.

Worst case scenario, they extrapolate the overall effect on the term of your mortgage and the money you save by paying it off earlier thanks to the offset reduction in interest. That could end up being BIK on 10's of thousands of pounds.

[css_jay99]

any more news on this ?

[northernladuk]

any more news on this ?

Nope.

[Wanderer]

There was never a definitive answer to this idea of holding the money in trust and in the absence of that I would say that it's not been proven to work.

The accepted way to do it is as a directors loan and there was a detailed discussion in that thread. If you are intending to clear the loan (ie by paying a dividend) before 9 months after the company's year end then there is no problem with doing this. This would be the case if you are borrowing the company's corporation tax money and are intending to repay it when the company needs it.

If you are taking a loan to avoid the 40% tax rate and the loan is still going to be outstanding at 9 months after the company's year end then you have to make sure you can pay 25% of the loan to HMRC under Section 455 of the Corporation Tax Act 2010 which HMRC will repay once the loan is paid off.

Don't go taking a loan from the company unless you are going to invest it yourself (in a safe investment) or use it to pay off your offset mortgage. If you are the type who spends a lot on beer and hookers then directors loans are not for you.

[psychocandy]

Accountants always seem unkeen when you express the idea of a Directors loan.

Is this because if you dont pay it back in time then the costs are considerable?

I guess accountant doesn't want to get it in the neck when you have a shedload of tax liabilities that are purely your own fault but they're getting the blame. After all, I bet there are million out there who'd just spend the money and not have it to pay it back.

On a slightly different note, my brother is in the process of finding out that HMRC are not very happy when you spend all the income allocated for tax and then try to tell them you spent it all when it comes time to pay up. Not the sharpest tool in the shed my brother!

[northernladuk]

Accountants always seem unkeen when you express the idea of a Directors loan.

Is this because if you dont pay it back in time then the costs are considerable?

I guess accountant doesn't want to get it in the neck when you have a shedload of tax liabilities that are purely your own fault but they're getting the blame. After all, I bet there are million out there who'd just spend the money and not have it to pay it back.

On a slightly different note, my brother is in the process of finding out that HMRC are not very happy when you spend all the income allocated for tax and then try to tell them you spent it all when it comes time to pay up. Not the sharpest tool in the shed my brother!

I would guess this is people abuse it and often fail to make the differentiation that this is company money and not personal money so causes them a headache. Remember the 5k directors loan cannot be repaid and re-taken a month later for another 18 months. This would be a bed and breakfast loan that has the effect of being payment rather than a loan without the tax.

Is he your twin brother?

I think the example of your brother further highlights why they are unwilling to do it. So many people can't get the basics right let alone taking money out as well.

[Wanderer]

On a slightly different note, my brother is in the process of finding out that HMRC are not very happy when you spend all the income allocated for tax and then try to tell them you spent it all when it comes time to pay up.

Yeah, that's probably why accountants are not keen on directors loans. I would be interested to hear what happens...

[blinko]

Base Rate + 0.75% for the next 20 years.

So I could get a much better return on £50k elsewhere for the forseeable future - maybe I'll look at Zopa again.

Nice mortgage, how on earth did you manage to source something like that ?

[psychocandy]

I would guess this is people abuse it and often fail to make the differentiation that this is company money and not personal money so causes them a headache. Remember the 5k directors loan cannot be repaid and re-taken a month later for another 18 months. This would be a bed and breakfast loan that has the effect of being payment rather than a loan without the tax.

Is he your twin brother?

I think the example of your brother further highlights why they are unwilling to do it. So many people can't get the basics right let alone taking money out as well.

LOL. Nope not my twin brother.

Slightly different because hes not in IT either. Just an example though of how some people would spend the money first and think later.

In my brothers case, he was completely clueless so I told him to get an accountant who, correctly, advised him that a gross payment to his ltd company was not all his to be spent. But the dull sod didnt listen and instead saw many beer tokens floating around in the bank account.

Now hes whinging that they're after him to the tune of £15K, young family to feed/cant afford to pay etc. No sympathy at all.....

Didn't some MTV presenter suffer a similar fate a while ago? i.e. spent the lot and then was skint?