Tax implications of making loan from ltd co to ltd co
I have a limited company that I used to use when I worked as a contractor. The business holds cash, and is not dormant. I wish to loan my daughter money for her new business, I know if I take dividends from the company as drawings I will pay tax. What are the implications of making a loan to my daughters company from mine? Alternatively is it possible to take "one-off" drawings from my company as a gift to my daughter?
Alternatively...
... if, when you say "my daughter's company", you actually mean a limited company, you can just loan money from your company to her company without tax consequence.
To add to George
You daughters Ltd Co could also pay interest to your Ltd Co, although this would be subject to corp tax unless you have losses or CA to offset.
Thanks George, this is
Thanks George, this is exactly the scenario I had wanted to undertake. Do you know what accounting standard covers this so I can read up on the details please?



Pay tax on dividends?
A company can only pay dividends out of its profits after paying corporation tax. In the hands of the shareholder, the dividend is treated as having had basic rate income tax paid. You will only have further tax to pay if the dividend grossed up by 100/90, together with your other income, exceeds £42,475 in the current tax year, thus putting you into the higher rate tax band, when you would become liable to pay an extra 25% of the net dividend on the excess of your total income over £42,475.
I am not sure about the status of the company. If you are no longer working as a contractor, you are presumably not using the company any more, yet you say it is not dormant. If you do not need the company, you could consider closing it, withdrawing all the money and applying to HMRC for clearance under ESC C16 before the end of this month. You would be liable to CGT, rather than income tax, on the gain over the cost of the shares, less the CGT annual exemption of £10,600, and might be entitled to claim the 10% rate of tax under Entrepreneur's Relief.