Borrowing from own LTD company.

[MarillionFan]

Have not discussed with my accountant yet, but was wondering what the rules are on taking a loan from your LTD for a short period of time.

Lets say for example you have £40k in your bank account.

£20k is put aside for corporation tax for 2011/2012 that needs to be paid in Sept 2012.
£5k put aside for VAT to be paid in a few months.
£8k put aside for Self Assessment tax

Bearing in mind I know I have to pay some interest on a loan. Can I take the £33k out for a 6 week short-term directors loan or is there an insolvency issue here???

I should add, I'm happy to take loans against the LTD for money I know will be paid out in divvies, this is about going into HMRCs money.

[dynamicsaxcontractor]

Have not discussed with my accountant yet, but was wondering what the rules are on taking a loan from your LTD for a short period of time.

Lets say for example you have £40k in your bank account.

£20k is put aside for corporation tax for 2011/2012 that needs to be paid in Sept 2012.
£5k put aside for VAT to be paid in a few months.
£8k put aside for Self Assessment tax

Bearing in mind I know I have to pay some interest on a loan. Can I take the £33k out for a 6 week short-term directors loan or is there an insolvency issue here???

I should add, I'm happy to take loans against the LTD for money I know will be paid out in divvies, this is about going into HMRCs money.

I am sure you are allowed to take it as a loan as long as you pay it back with interest at the rate set by the revenue. I am not an accountant so don't take my word for it though.

[northernladuk]

You can't take more than 5K for a directors loan. A penny more than that and you get taxed on the whole lot.

Someone wrote a good explaination of loan from company, just looking for it now. There was something interest about having to pay a % of what was left as some retention as well...

Back in a sec...

D000hg offers a solution to your problem here in the meantime though..

http://forums.contractoruk.com/accou...ml#post1469632

[Clare@InTouch]

You can't take more than 5K for a directors loan. A penny more than that and you get taxed on the whole lot.

Someone wrote a good explaination of loan from company, just looking for it now. There was something interest about having to pay a % of what was left as some retention as well...

Back in a sec...

Any money you take that is not wages, expenses or dividends is a loan, and there are 2 separate issues:

Any loan over £5,000 will be a benefit in kind, and you’ll pay tax on the deemed value of any interest you’ve saved by not going to a bank. Keep in mind this is the total value of money you owe the company, so if you take a loan of £5,000 and then overpay your wages by £2 then the loan is £5,002 and becomes taxable. You can avoid the BIK by paying interest at 4%.

Any loans outstanding at the balance sheet date (company yearend) have to be disclosed in the accounts and on the company tax return. If they are not repaid within 9 months of the year end then the company will pay extra Corporation Tax of 25% of the loan value. This extra 25% is repaid to the company by HMRC when you repay the loan to the company. You should avoid repaying a loan and then taking it out again soon after as it’s an obvious avoidance tactic HMRC call bed & breakfasting. They will see through it and tax it as if it had never been repaid.

[northernladuk]

Found it...

Any money you take that is not wages, expenses or dividends is a loan, and there are 2 separate issues:

Any loan over £5,000 will be a benefit in kind, and you’ll pay tax on the deemed value of any interest you’ve saved by not going to a bank. Keep in mind this is the total value of money you owe the company, so if you take a loan of £5,000 and then overpay your wages by £2 then the loan is £5,002 and becomes taxable. You can avoid the BIK by paying interest at 4%.

Any loans outstanding at the balance sheet date (company yearend) have to be disclosed in the accounts and on the company tax return. If they are not repaid within 9 months of the year end then the company will pay extra Corporation Tax of 25% of the loan value. This extra 25% is repaid to the company by HMRC when you repay the loan to the company. You should avoid repaying a loan and then taking it out again soon after as it’s an obvious avoidance tactic HMRC call bed & breakfasting. They will see through it and tax it as if it had never been repaid.

[MarillionFan]

Any money you take that is not wages, expenses or dividends is a loan, and there are 2 separate issues:

Any loan over £5,000 will be a benefit in kind, and you’ll pay tax on the deemed value of any interest you’ve saved by not going to a bank. Keep in mind this is the total value of money you owe the company, so if you take a loan of £5,000 and then overpay your wages by £2 then the loan is £5,002 and becomes taxable. You can avoid the BIK by paying interest at 4%.

Any loans outstanding at the balance sheet date (company yearend) have to be disclosed in the accounts and on the company tax return. If they are not repaid within 9 months of the year end then the company will pay extra Corporation Tax of 25% of the loan value. This extra 25% is repaid to the company by HMRC when you repay the loan to the company. You should avoid repaying a loan and then taking it out again soon after as it’s an obvious avoidance tactic HMRC call bed & breakfasting. They will see through it and tax it as if it had never been repaid.

So to clarify, you can withdraw any amount in your LTD account regardless of it's final destination, on the priviso of a loan as long as it's declared & you pay it back within 9 months of year end. That's what I thought, just wasn't 100% certain if I could without any fear of wrongdoing pull out every last penny for a short period of time bearing in mind I know the money is earmarked for Hector.

(Oh and the reason. I'm off to a property auction) :-)

[Clare@InTouch]

Found it...

That's brilliant, sounds just like something I'd say......

[northernladuk]

That's brilliant, sounds just like something Craig would say......

[northernladuk]

(Oh and the reason. I'm off to a property auction) :-)

Ohh what you getting???

[Clare@InTouch]

I used to like you