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  1. #21

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    Quote Originally Posted by SandyD View Post
    I googled and didn't find anything regarding rules from Ltd business to non Ltd business.

    Funnily enough on one of the taxation / accounting forum I saw questions about a sole trader business loaning money to another sole trade business, they said such loan is a balance sheet entry, first business bank balance would be reduced but the debtors would increased. This transaction does not go into the profit and loss account.
    - it is not an expense for the lender to lend other business money and
    - it is not income for the other business to receive a money loan

    But it seems no one knows about the Ltd to non ltd business scenarios
    OK, let's put it a different way:
    If a sole trader takes a loan, it is treated as a personal loan. Here's more about sole traders and money:
    Protect yourself from your business | This is Money

    Or, a question to throw back to the other forum when they said "It is no income for the other business to receive a money loan". Ask them what they meant by that, and how should the receiving sole trader treat that money?

    Rather than trying to treat this as one complete process, if you break it down in two, the answers have been given, and are out there.
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  2. #22

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    Quote Originally Posted by SandyD View Post

    But it seems no one knows about the Ltd to non ltd business scenarios
    I do. And I’ve already explained it to you. I’m not sure what else you want from us.

    To be 100% crystal clear: a loan FROM a director to a sole trader or a partnership or an LLP is classed as a director’s loan under the connected persons rules. S455 tax is due on the outstanding balance.

  3. #23

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    Quote Originally Posted by SandyD View Post
    I googled and didn't find anything regarding rules from Ltd business to non Ltd business.

    Funnily enough on one of the taxation / accounting forum I saw questions about a sole trader business loaning money to another sole trade business, they said such loan is a balance sheet entry, first business bank balance would be reduced but the debtors would increased. This transaction does not go into the profit and loss account.
    - it is not an expense for the lender to lend other business money and
    - it is not income for the other business to receive a money loan
    That's because the loan is meaningless, just like it would be if you loaned your dad some cash. Does it affect your bank account (Balance sheet?) - yes, of course it does. Does it affect your Self Assessment? No, because it's not a "thing" - it's neither tax deductible or taxable.

    But it seems no one knows about the Ltd to non ltd business scenarios
    That's because you're looking for some kind of scenario that only exists in your head. As far as HMRC are concerned you're either lending to a Ltd Business entity or you're lending to an individual. There is no third wildcard option and you're becoming increasingly frustrating by not disclosing what it is you're trying to achieve. It's quite clear you want to get a lump sum out without incurring a tax penalty and it isn't going to happen.

  4. #24

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    Why not tell us what your accountant advised. They might have been given a clearer picture so we can actually find out what the exact scenario is from their statement? Do we assume he gave you an answer you didn't want to hear?
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  5. #25

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    NLUK, no.

    Everyone else you are missing the important second point here:

    - it is not an expense for the lender to lend other business money and
    - it is not income for the other business to receive a money loan
    The first point yes I knew and its fine, the interesting one is the second one !!

  6. #26

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    Quote Originally Posted by SandyD View Post
    NLUK, no.

    Everyone else you are missing the important second point here:



    The first point yes I knew and its fine, the interesting one is the second one !!
    Do you get taxed on bank loans and credit card debt?

    FYI for others, this is the thread he's reading and completely misinterpreting: https://www.taxationweb.co.uk/forum/...er-t46211.html

  7. #27

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    Quote Originally Posted by vwdan View Post
    Do you get taxed on bank loans and credit card debt?
    No, but if its classed as director's loan you may !!

  8. #28

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    Quote Originally Posted by SandyD View Post
    No, but if its classed as director's loan you may !!
    Right, but Directors Loans are a very specific legal entity because you're in a controlling position of both sides of the transaction - one of which is in a special legal entity.

  9. #29

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    Quote Originally Posted by vwdan View Post

    FYI for others, this is the thread he's reading and completely misinterpreting: https://www.taxationweb.co.uk/forum/...er-t46211.html
    Please explain how I misinterpreted, would like to understand it better, I did say it was sole trader to sole trade loan, not ltd to sole trader....
    Everyone here agrees a ltd to sole trade must be considered as a director loan.
    But if the sole trader got the loan from a bank or another sole trader then the lender business wont be considered director loan... would like to understand the difference.

    However never mind, am OK with the answer you all agree on, and if its a director loan that's fine.

  10. #30

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    LOL. A sole trader loan to a sole trader loan is not a directors loan because there is no director.

    It's a loan from a guy to another guy, as far as HMRC is concerned. For an accountant, yeah, if they are preparing a balance sheet for a sole trader business, it shows up as an asset for one guy and a liability for another.

    You do realise that a balance sheet for a sole trader has nothing to do with tax, right? A sole trader reports net business income (revenue-expenses) as personal income on his self assessment. A balance sheet is an interesting accounting thing that doesn't matter for tax.

    If you want to know how to enter this loan on your sole trader business balance sheet, you can enter it as a liability if you want. It isn't income for your sole trader business. You can write an IOU, or not. You can keep it in a safe or whatever. Nobody cares what you do there.

    If you want to know how to reflect it on your ltd co accounts, it is a directors loan, whether you use it in your sole trader business or to buy drugs. The only way it isn't a directors loan is if it is paid as salary (reported RTI) or dividend (proper paperwork), both of which incur tax, or if it is loaned to a legally-recognised entity other than yourself. Your sole trader business is NOT a legally-recognised entity other than yourself.

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