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Commerical Loan to a Director

Commerical Loan to a Director

Hi 

Does anyone know if there are any rules (apart from shareholder approval) to lending a Director money of £100,000 to help the purchase of their home. The Director will pay interest on the loan at the HMRC approved rates. 

Thanks

 

 

 

 

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17th Jul 2017 14:49

There are no rules as such, but if the director is a significant shareholder there is probably a tax consequence you have not mentioned.

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By Ruddles
to johngroganjga
17th Jul 2017 15:02

What does "significant" have to do with anything?

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to Ruddles
17th Jul 2017 17:22

I was trying to avoid defining "participator in a close company" in unnecessary detail.

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By Ruddles
to johngroganjga
17th Jul 2017 17:54

All that you had to say was "shareholder". "Significant" neither adds nor avoids anything.

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to Ruddles
18th Jul 2017 08:04

But the company also has to be close. "Significant" was to hint at the characteristic feature of such companies that they are controlled by a relatively small number of people, whose shareholdings are thereby not likely to be trivial.

It was not meant to be a watertight definition. It was meant to give the flavour only.

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By Ruddles
to johngroganjga
18th Jul 2017 08:14

Fair enough, John. But I'd be 99.9% confident that the company in this case is close.

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17th Jul 2017 15:13

The company will need to lend HMRC 32½% of whatever capital balance is outstanding at the company's year end.

Repayable when the director repays his loan, so not real "tax", but still a cash flow implication.

Edit - I'm assuming the director is a participator too.

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By Ruddles
to lionofludesch
18th Jul 2017 09:29

You're also assuming (reasonably) that the company is close and (equally reasonably) that the company is not in the business of making loans.

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17th Jul 2017 16:59

So even if it is a 'commercial loan' it still falls under S455?

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to kjricketts5115
17th Jul 2017 17:02

Yes.

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18th Jul 2017 13:48

I don't think it needs a CCL, but I think mortgages (to anyone) are regulated, so you should check all that if it's secured.

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