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BIK limit of £10k on directors loan

Can a husband and wife jointly borrow £10k or £20k from their ltd co?

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BACKGROUND: Husband & wife ltd co, 50/50 shareholding, both directors.

If the company advances a loan of £10k to the Husband (which is repaid in full before 9 months after the year-end) then there is no BIK charge or s455 tax payable.

QUESTION 1: What if the same company advances another seperate loan to the wife of £10k (which will also be repaid in full before 9 months after the year-end)? The loan agreement is seperate but as she is related to her husband (also director) do the BIK rules consider that she / they have a loan in excess of £10k and chargable to BIK?

QUESTION 2: What if the loan agreements were made out in Joint names - i.e. "a loan of £20k to Mr & Mrs". Do they each still fall under the £10k BIK small loan threshold (presuming that they even fall within that thershold in Q1)?

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By The Dullard
30th Apr 2021 16:46

On both EIM20505 and EIM26280, both of them are useful in determing how to make a just and reasonable apportionment for the purposes of s 185. Neither of them are suggesting that the family member's loan is not an employment-related loan for the purposes of first apply the £10,000 threshold in s 180.

There is no "strict" interpretation about it. The only possible interpretation is that both the husband's loan, and the wife's loan, and the joint loan are employment-related loans by reference to both the employment of the husband and that of the wife.

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By The Dullard
30th Apr 2021 16:50

Okay we're about to exceed the 50 post threshold everybody. That's one threshold that applies to all of our posts, rather than each having a 50 post threshold with all of our posts counting, although that's much of a muchness.

Anyway, 50 post threshold approaching, so. I'm out!

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By Tax Dragon
30th Apr 2021 17:26

My summary of all this (as I too find multiple-page threads hurt my bottom... and you are all sick of me already... so I should probably exit too now) is that there is no principle of mutual exclusivity (generally in tax law; specifically in Ch7). Just as my brother's control of his company does not preclude me from controlling it by attribution (one of my other discussions with Wilson), so too the fact that a loan is employment-related by reference to H's employment does not prevent it from being employment-related by reference to W's employment. (Which, @Matrix, is why you read the rest of the sentence.)

Dulls has set out the context for when you ask the question. When W asks herself "is that loan, for the purposes of my tax, employment-related?" she answers "though it wasn't made to me, the employee, it was made to my husband - a relative - and I've been on the boat he bought with it - a benefit - so s174(5)(b) doesn't help. So... yes, it is, for me, an employment-related loan."

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Replying to Tax Dragon:
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By The Dullard
30th Apr 2021 17:29

Post 51! Nobody's reading! :P

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Replying to The Dullard:
A Putey FACA
By Arthur Putey
30th Apr 2021 18:36

I am!

Very late to the party here, and about to go to the pub, but an interesting discussion. I do wonder about the pooling argument.

And in seeking to make any loan arrangement watertight, don't forget the Companies Act folks!

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By More unearned luck
30th Apr 2021 20:03

Very interesting.

I wonder how many P11ds over the years have been completed on Wilson's view and how many on Dulls/TD's view. Does HMRC take Dulls/TD's point - someone mentioned it wasn't in the checklist?

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RLI
By lionofludesch
01st May 2021 06:49

How much tax is at stake here?

A few quid?

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