LOAN FROM OVERSEAS RELATED PARTY TO UK COMPANY

LOAN FROM OVERSEAS RELATED PARTY TO UK COMPANY

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Hello,

My client is a non- UK resident individual, and is the sole-shareholder and Director of a UK Company (close company). The UK co needs to loan money.

UK co. can get a loan from an overseas company, where the Director is a participator, and it could be interest-free and be paid back within one year.

I would like to know if there can be any tax implications from a UK point of view, and if we need to have any specific clause or wording in the loan agreement.

No interest deductions would be done in the UK return as loan would be interest-free.

Many thanks in advance for the help

Replies (2)

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Euan's picture
By Euan MacLennan
10th Feb 2014 12:35

No tax implication

I think you mean that the "UK co needs to borrow money".

I cannot see any tax implication (apart from there being no interest to deduct from the UK company's profits), but you might need to undertake some MLR procedures on the source of the loan.  Making a loan and getting it repaid within a short period is one of the classic methods of washing dirty money.

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Replying to Moonbeam:
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By non-uk business
11th Feb 2014 21:44

Hi Euan,

Many thanks for your reply, and sorry I am in the process of improving my English.

Just out of curiosity, as I think this will not be a Money Laundering operation, as the overseas company is a well known business of the UK Director. 

Anyway, how could it be money laundering, if the money is coming from Overseas Co, and then repaid to Overseas Co. Overseas Co would not have any solid argument about that money's origin it would remain in the same situation. Is that what you meant?

Thanks

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