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Can my company give money to another company?

Limited company giving money to another limited company with no loan conditions

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I am the sole director of a limited company involved in design engineering. I want to set up a 2nd limited company that's totally unrelated to trial a new business idea but I need some start up capital. As I would intially be the sole director of both companies, is there any way my current company can give around £5000 to the new company as start up capital? My accountant  has advised me that this can be done as a business loan but there needs to be an agreement in place. As I don't know whether my new business idea will work, is there any way this can be done without having the usual loan conditions that stipulate payment terms and interest rates? i.e. can that money be thought of as a gift? I would personally loan the 2nd company the money but obviously it needs to come out of my pocket and unforunately I need the cash at the moment.

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By memyself-eye
19th Jun 2019 10:24

I lent my son's company £12k recently from my company. No agreement. He paid it back yesterday.

If your company 'B' fails to repay your company 'A' who are you going to pursue?

Answer: no one.

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Replying to memyself-eye:
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By asimeou
19th Jun 2019 10:50

How did you sort out both company accounts in this case? Did either incur any additional taxes? How long did it take your son to pay it back?

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By Vile Nortin Naipaan
19th Jun 2019 10:29

Yes. Company A can gift company B a sum of money. Company B will then need to donate 19% to HMRC.

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Replying to Vile Nortin Naipaan:
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By asimeou
19th Jun 2019 10:52

Hi, what's the 19% for? Seems a bit unfair to me given that the money is already sat in the company and has already incurred corporation tax for me to then give it to another company who has to give another 19% away?

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Replying to asimeou:
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By Vile Nortin Naipaan
19th Jun 2019 12:53

Well, what will company B spend the money on? and will it claim a corporation tax deduction for those things?

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David Winch
By David Winch
19th Jun 2019 11:00

Presumably you do not literally mean to "give" or make a gift. You mean an interest free loan, unsecured with no fixed repayment date? Should be no problem in that case.

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Replying to davidwinch:
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By asimeou
19th Jun 2019 11:15

Hi David, well I wouldn't go chasing for the money if I didn't get it back but obviously if it is a requirement, it can be loaned, interest free. Are there any conditions on a loan like this? I was told they need to be paid back within 9 months? I'm happy to loan the money from company A to company B with a condition that company B can repay the money when it suits. Will either company have any additional tax liabilities in this case?

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By MissAccounting
19th Jun 2019 11:04

Gift some to me and I'll give you the answers you seek.

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Hallerud at Easter
By DJKL
19th Jun 2019 11:42

Have you / your accountant considered a Group?

Given Newco may make losses/may not work, it possibly ought to be considered.

Whether it is the right way to go depends on a lot of factors- why meeting clients and chatting with them somewhat helps re giving them sound advice.

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