Business- Funds - Investment?

**Jessica@WhiteFieldTax** · 9 July 2015, 09:56

Re 2 - short answer no. Long answer yes, but you would need a deed of trust or face the consequences of this being a loan to you. Either way its provocative.

Re 3 - yes, you could, but (a) may have impact on long term access to things like entrepreneurs relief and (b) puts investment at risk in a trading company which is not good practice. Opinions differ, but my preference is to take a dividend, provide for the tax, and invest in your personal name. You are less geared to start with, but the longer term tax and security looks better.

**jmo21** · 9 July 2015, 10:09

Have a look at Aldermore for a business savings account with interest in the meantime. Nothing like your 3% personal Santander, but better than nothing.

**minstrel** · 9 July 2015, 10:36

As Jessica says you have to be careful transferring to Santander123 as this will be considered a beneficial loan.

However, if you pay your company interest on the loan at the official HMRC rate (currently 3%) then it is not treated as a beneficial loan.

Coincidentally, the Santander123 interest rate is 3% gross (although 20% is normally deducted at source).

So, as long as you pay your company 3% interest on the loan, then it is fine to put the money in Santander and earn the interest. The 3% interest earned by the company will increase profits and incur 20% Corporation Tax, but it's definitely better than earning no interest in a company bank account.

Also, remember that if you pay yourself a low salary then you may be able to reclaim the 20% tax that was deducted at source by Santander on your self assessment tax return as this is likely to fall in the starting rate for savings band.

**northernladuk** · 9 July 2015, 10:47

On point 2 remember the company money does not belong to you, it belongs to the company. Moving it in to a personal account means it then belongs to you so there are complications. Don't forget this distinction as it's very important.

**ChimpMaster** · 9 July 2015, 12:41

Makes one think, if you have an offset mortgage, you can loan funds from your Ltd into your offset account and therefore reduce/negate the mortgage interest payments. You have to weigh up how much you actually save though.

Assuming £100k mortgage at 3%: this equates to interest payments of £250/month payable to the lender. This is sunk money, never to be seen by you again.

Taking a director's loan to use as mortgage offset: £100k at 3% (to avoid BIK) means financing cost on this loan of £250/month, which you pay into your company. At 20% CT this costs £50/month in corporation tax. The remaining £200/month remains in your company, to be extracted at your marginal rate of tax - perhaps 7.5% on the new dividend rules - so £15/month dividend tax on the £200. Total cost of loan per month is therefore £65.

Over the year you save (250 x 12) - (65 x 12) = £2,200.

Just make sure you put the funds back into your Ltd company account before the deadline. And then extract again after whatever time is deemed reasonable.

Wonder if that'd work....

**Dallas** · 9 July 2015, 12:57

... for fraudulently manipulating your mortgage payments owed through your cash reserve statements using cash you do not legally own.

Course it would work

**ContrataxLtd** · 9 July 2015, 13:23

Originally posted by ChimpMaster View Post

Makes one think, if you have an offset mortgage, you can loan funds from your Ltd into your offset account and therefore reduce/negate the mortgage interest payments. You have to weigh up how much you actually save though.

Assuming £100k mortgage at 3%: this equates to interest payments of £250/month payable to the lender. This is sunk money, never to be seen by you again.

Taking a director's loan to use as mortgage offset: £100k at 3% (to avoid BIK) means financing cost on this loan of £250/month, which you pay into your company. At 20% CT this costs £50/month in corporation tax. The remaining £200/month remains in your company, to be extracted at your marginal rate of tax - perhaps 7.5% on the new dividend rules - so £15/month dividend tax on the £200. Total cost of loan per month is therefore £65.

Over the year you save (250 x 12) - (65 x 12) = £2,200.

Just make sure you put the funds back into your Ltd company account before the deadline. And then extract again after whatever time is deemed reasonable.

Wonder if that'd work....

I've not checked your figures (too busy with budget stuff....) but in principle your theory does work and I know of some people who have done this. Also, declaring maximum tax free dividends (soon to stop) at the beginning of tax year and also putting all their personal funds set aside for tax payments into the offset.

You can get some good interest savings by doing all these things if you have an offset but you have to work the figures through to ensure it's viable.

Martin
Contratax Ltd

**minstrel** · 9 July 2015, 13:28

Originally posted by Dallas View Post

... for fraudulently manipulating your mortgage payments owed through your cash reserve statements using cash you do not legally own.

Course it would work

How is it fraud?

There are potential BIK tax consequences with director loans, but providing it is accounted for correctly in the company accounts it is certainly not fraud.

**ChimpMaster** · 10 July 2015, 13:32

Originally posted by Dallas View Post

... for fraudulently manipulating your mortgage payments owed through your cash reserve statements using cash you do not legally own.

Course it would work

Originally posted by minstrel View Post

How is it fraud?

There are potential BIK tax consequences with director loans, but providing it is accounted for correctly in the company accounts it is certainly not fraud.

Indeed Minstrel... just goes to show little some people know about managing their finances.

Business- Funds - Investment?