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Loan to buy interest in close company

I have a client who is a 40% shareholder and director in a recently formed company which is trading in the field of buying residential properties, refurbishing and then selling them on.

This director has a substantial open credit facility with a well known Building Society jointly with his wife and secured against their principal residence. Despite his ability to make a valid claim for non-miras interest against his personal Schedule Income (arising from an associated company in which he is a 45% shareholder) on the loans drawn down and injected to assist in buying property, he wants the trading company to pay the interest and claim relief for corporation tax purposes.

Given ICTA 1988 s 368(2) does the latter automatically preclude the company accepting the responsibility for paying the interest and claiming relief - there is no intention of making a double claim.
Any thoughts urgently please.

Peter Reader

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Two loans
In my experience you can not have the company settling the interest or repayments directly to the bank as the loan is the personal liability of the director. Rather there are two loans, first from the bank to the director and second from the director to the company. The director claims relief on his/her loan and the company claims relief on its loan.

The director has to show the interest charged to the company as income on his/her tax return. Finally I think that, if the loan to the company is capable of running for more than one year, then the company will have to deduct tax on interest it pays to the director.

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