Linking Director/Shareholders Mortgage Account to Personal Company Account
My clients, a married couple, have a mortgage and own a company that is running a substantial surplus on a bank account with the same bank. The bank (one of the large banks) has suggested linking the accounts, which would save significant amounts of interest for my client. The bank seems to be suggesting (I'm not 100% clear) that money is siphoned off from the company account into a personal account and repaid immediately before the end of the company's accounting year and/or that the company opens an account in the name of one of the directors. This raises a number of issues, eg:
- whether the Companies Acts rules on loans to directors are breached, and the implications if they are (the company is unlikely to have creditors who would object, for example).
- how the benefit in kind rules are impacted: would there be a tax charge on loans? can it be got round by the company charging its directors a commercial rate of interest? would the linkage of itself involve a chargeable benefit in kind? again, could this be got round by the company charging a fee for the service?
- does the company's bank account need to be in its own name? could, for example, my clients have an account in their personal names which is operated in trust for the company, provided they are scrupulous about not using the money for personal expenditure?
I'd welcome any thoughts, or relevant experiences, others have had.