Taking a loan from our Ltd company

[jenhanr]

Just wanted to see if anyone could answer this before I went to our accountant.

If we need to borrow £13k from the company, with a view to repaying it back over 5-6 months, can we do this without it affecting our dividends or tax owed?

It is just a loan to enable us to move closer to work. The house rental company requires 6 months upfront and other deposits/fees as we don't earn enough & haven't been in operation long enough to just pay deposit & rent every month as normal. We have enough to cover these costs & then repay it monthly so won't be an issue. Thank you!

[northernladuk]

Have you attempted to do any of your own research on this at all?

Try the search method as described in the thread below. Loans have been discussed ad nauseum on here.

http://forums.contractoruk.com/welco...uk-forums.html

[Wanderer]

If we need to borrow £13k from the company, with a view to repaying it back over 5-6 months, can we do this without it affecting our dividends or tax owed?

Don't do this if you are "no good with money" and are tempted to squander the money or there is a possibility that you may fall on hard times and not be able to pay it back.

Presuming you and/or your spouse are the sole shareholders, you are perfectly within your rights to borrow money from the company. There are a few things to be aware of, have a read of this post about director's loans.

Make sure you know exactly what to do with regards to paying off the loan and then ask your accountant to write up the following:

• How much interest will you have to pay on the loan and what will be the net cost of the loan once the company pays the interest back to you
• What date is the company end of year and can you avoid having the loan outstanding on that day (simplifies accounting but not essential)
• What date is 9 months after the company year end (drop dead date for repaying the loan)
• What the tax charge is if your loan is still outstanding at 9 months after the company year end.
• What happens if you squander the money and you "can't" repay the loan

As an aside, you should ask the accountant if your company can pay you tax free relocation expenses. I know they may be able to for proper employees, but I don't know if that applies to company directors.

Do this too:

Try the search method as described in the thread below. Loans have been discussed ad nauseum on here.
http://forums.contractoruk.com/welco...uk-forums.html

[Martin at NixonWilliams]

Just wanted to see if anyone could answer this before I went to our accountant.

If we need to borrow £13k from the company, with a view to repaying it back over 5-6 months, can we do this without it affecting our dividends or tax owed?

If you do not want the loan to affect your dividends or tax owed you will need to pay interest to the company.

Based on a loan of £13,000 for 6 months you would need to pay £260 (£13,000 x 4% x 6/12).

I hope this helps.

[Contreras]

Also not forgetting that loans over £10k need to be approved and minuted at a shareholder's meeting.

[jenhanr]

Wow yes thanks for all the help.

Might go the route of paying interest just to avoid going over the threshold and making things messy.

If there are two shakeholders, myself and husband, should we have documented the conversation we had over dinner?

[northernladuk]

Might go the route of paying interest just to avoid going over the threshold and making things messy.

And what is your other option pray tell? Just take it out and put it back hoping no one will notice?

[jenhanr]

And what is your other option pray tell? Just take it out and put it back hoping no one will notice?

Uhhh no.

If I knew exactly what I was doing, I wouldn't have to ask here. Thanks for the help.

[northernladuk]

Uhhh no.

If I knew exactly what I was doing, I wouldn't have to ask here. Thanks for the help.

It's just that you said you might pay the tax like there was another option.

If you discussed it over dinner then claim it as a business expense

[Martin at NixonWilliams]

And what is your other option pray tell? Just take it out and put it back hoping no one will notice?

The other option would be to declare the benefit in kind on the P11d, but this is usually more expensive!

In the rare circumstance that the P11d option is cheaper, most opt to pay the interest instead anyway as it removes the need to declare the loan on the P11d and doesn't complicate the calculation for determining how much of your basic rate threshold remains etc.