Loan to third party

[lilelvis2000]

I can't find my previous thread on this..it was more than one year ago. I've checked through the "archives" as well.

But last year I made a loan to a friend - never mind the reasons - from my company. It was for £15,000 total. Now my accountant says that that's not really above board and I need to decide if:
- I take a directors loan of £5,000 and take a £10,000 divi. on it.
- take the whole £15,000 as a loan and pay the %25 tax

The first option is the "cheapest" I suppose.

great..... You get advice one year which says its okay..The next year its not.

I am now stressed out.

[Generalist]

I can't remember if there is a £5K limit on directors loans but I guess your accountant should know best! By implication I'll assume there is little likelihood of the loan being repaid so its down to timing of the tax payments. Once way of defraying this would be to take a personal loan or better still if your credit rating can stand it one or more credit cards with a 9 months or better interest free period. A few of these come with cheques that allow better access to the cash (watch the small print for charges though!). You still have to make minimum payments but at least you are deferring the tax by "repaying" some or all of the loan.

Another way of putting things off for another year would be to get your friend to write out a cheque to the company but don't bank it, treat it as cash in transit - might not get past your accountant though!

[ASB]

Check your articles to make sure that money lending is in them (or at least the "anything the directors see fit" caveat).

If it is genuinely loaned to a non connected person on commercial terms get another accountants opinion.

[lilelvis2000]

Check your articles to make sure that money lending is in them (or at least the "anything the directors see fit" caveat).

If it is genuinely loaned to a non connected person on commercial terms get another accountants opinion.

My article actually state that the company can lend or advance monies with out without security to anybody, firm...etc...

unless there is a legal restriction on this - other than the £5,000 limit for directors - I can't see a problem. Or unless HMRC takes a dim view of a IT consultancy doing such things...because I am not a bank for example...

[ASB]

My article actually state that the company can lend or advance monies with out without security to anybody, firm...etc...

unless there is a legal restriction on this - other than the £5,000 limit for directors - I can't see a problem. Or unless HMRC takes a dim view of a IT consultancy doing such things...because I am not a bank for example...

In terms of HMIT I see no reason why this should not just be a long term creditor (subject to them not being connected).

However, in order to lend you should have an OFT licence. It might be that which is worrying your accountant. Provided it does not take you into 40% it might be just as cost effective to take the money as a DIVI and then you personally have made the loan to him.