Can I lend money off my LTD company?
Discussion
Legally - no.
If you DO borrow (I think that is the word you meant) from your own company, there are three main areas where you are making trouble for yourself -
1. Section 419 Corporation Tax
If you borrow from your own company and the borrowings remain unpaid at your company's year end date, your company is potentially liable to an additional Corporation Tax liability based onn the balance unpaid at the balance sheet date. If the balance was £20,000, your company would need to pay £4,200 S.419 Corporation Tax. This Corporation Tax is additional to any Corporation Tax arising on the comnpany's normal trading profits.
Once the borrowings are repaid in full by the director, the S.419 tax paid will be refunded by HMRC - but you can wait for up to two years for this money to come back to you.
If you were able to repay the borrowed amount in full within nine months of the company's financial year end date, you will not have to pay the S.419 amount.
2. Benefits in Kind
If you borrow from your company and the company does not charge you any interest on the amount borrowed AND the balance on the borrowings at any time during the course of the loan was greater than £5,000, then you will be subject to an Income Tax charge through the PAYE Benefit in Kind system because your employer (i.e. the company) has provided you with a cheap or free loan. The details of the loan needs to be returned on a form called a P11D and there are penalties for failing to supply a P11D by the due date.
3. Accounts
The Companies Act requires that loans to directors and the basic terms and conditions attached to the loan be disclosed in the company accounts in accordance with Accounting Standards and Companies Act discloure requirements.
I would expect that your accountant will brief you on all of the above points.
If you DO borrow (I think that is the word you meant) from your own company, there are three main areas where you are making trouble for yourself -
1. Section 419 Corporation Tax
If you borrow from your own company and the borrowings remain unpaid at your company's year end date, your company is potentially liable to an additional Corporation Tax liability based onn the balance unpaid at the balance sheet date. If the balance was £20,000, your company would need to pay £4,200 S.419 Corporation Tax. This Corporation Tax is additional to any Corporation Tax arising on the comnpany's normal trading profits.
Once the borrowings are repaid in full by the director, the S.419 tax paid will be refunded by HMRC - but you can wait for up to two years for this money to come back to you.
If you were able to repay the borrowed amount in full within nine months of the company's financial year end date, you will not have to pay the S.419 amount.
2. Benefits in Kind
If you borrow from your company and the company does not charge you any interest on the amount borrowed AND the balance on the borrowings at any time during the course of the loan was greater than £5,000, then you will be subject to an Income Tax charge through the PAYE Benefit in Kind system because your employer (i.e. the company) has provided you with a cheap or free loan. The details of the loan needs to be returned on a form called a P11D and there are penalties for failing to supply a P11D by the due date.
3. Accounts
The Companies Act requires that loans to directors and the basic terms and conditions attached to the loan be disclosed in the company accounts in accordance with Accounting Standards and Companies Act discloure requirements.
I would expect that your accountant will brief you on all of the above points.
hillcrest said:
I have lots more money in my LTD company then I actually have. Can I say borrow say £20k off my company and pay it back accordingly?
YesStick it in the directors loan account, draw it but make sure you pay it back ! So the answer is yes,just have a chat with the accountant that's what he's there for.
squeezebm said:
hillcrest said:
I have lots more money in my LTD company then I actually have. Can I say borrow say £20k off my company and pay it back accordingly?
YesStick it in the directors loan account, draw it but make sure you pay it back ! So the answer is yes,just have a chat with the accountant that's what he's there for.
Of course, many directors DO borrow from their company and make sure the loan is cleared by 5 April or the end of their accounting year so they don't have to show it in their company balance sheets or disclose it in the notes to the accounts.
This is not strictly speaking correct, but it makes it very hard for the relevant authority (i.e. Companies House or HMRC) to be aware of the fact that a loan did exist at some point during the accounting or tax year.
Eric Mc said:
squeezebm said:
I'll stick with my accountants advice thanks, which has served me well for the last 6 years! Not some "expert" on the interweb .
You never know, there might be some accountants on PH.
Davidy
I disagreed with Eric, as I have on several occasions when I first started in business lent cash to and from my business it's called cash flow,it's how businesses start ! I always took advice from my accountant and have never had a problem with HMRC . The op might need the £20 k for a week or a year nobody knows but him . Because there is disagreement about something doesn't make it right or wrong ! Now get over yourself as Eric is more than capable of answering for himself .
I disagreed with Eric, as I have on several occasions when I first started in business lent cash to and from my business it's called cash flow,it's how businesses start ! I always took advice from my accountant and have never had a problem with HMRC . The op might need the £20 k for a week or a year nobody knows but him . Because there is disagreement about something doesn't make it right or wrong ! Now get over yourself as Eric is more than capable of answering for himself .
squeezebm
Having started (and sold out of) several businesses, I think I might understand cashflow. What Eric says is fundamentally right, but also what you say is correct, in that the OP should talk to his accountant. Some accountants play it straight by HMRC rules, others will bend a bit for their clients benefit.
In any discussion, there can be two sides, and disagreements can occur, but politeness costs nothing
davidy
Having started (and sold out of) several businesses, I think I might understand cashflow. What Eric says is fundamentally right, but also what you say is correct, in that the OP should talk to his accountant. Some accountants play it straight by HMRC rules, others will bend a bit for their clients benefit.
In any discussion, there can be two sides, and disagreements can occur, but politeness costs nothing
davidy
squeezebm said:
I'll stick with my accountants advice thanks, which has served me well for the last 6 years! Not some "expert" on the interweb .
Rather ironic, given that you are, yourself, answering as fact on this thread something which is intirely incorrect.Such aggression about a directors loan account. I take it you're struggling a bit?
Op and others who loan themselves from the company I'm guessing from the responses that in fact you do not declare this on your self assessment and pay the relevant tax hence the agressive challenge.
Ignoring the law why do you think it is morally correct for others doing the same as you to pay the rightfully bik tax when you decide not to declare it onyour self assessment?
I put it to you to call the hmrc don't give your name and dial 141 first but ask the question directly to them about declaration of the loan and the bik tax due.
Ignoring the law why do you think it is morally correct for others doing the same as you to pay the rightfully bik tax when you decide not to declare it onyour self assessment?
I put it to you to call the hmrc don't give your name and dial 141 first but ask the question directly to them about declaration of the loan and the bik tax due.
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