We have a client with conflicting advice regarding an LLP Member making a loan to his own LLP. The Member is a Jersey company, but I don’t think that makes a difference here. The loan is commercial and subject to its own loan agreement, and interest is to be paid to the Member by the LLP on the loan. Our thinking is that:
- The loan is included in LLP capital in the Accounts,
- Interest paid does not touch the P&L, but is included with that LLP’s profit share, and taxed accordingly.
- Interest paid is not subject to withholding tax under the CT61 system.
The Jersey side have different advice. They are saying that, as the loan is commercial, interest bearing and subject to its own loan agreement, then its just like any other 3rd party loan to the LLP. So included in Creditors and Interest Payable in the Accounts. The interest is not a prior profit share, but is interest subject to CT61 rules.
I thought that money lent to your own LLP was always just capital introduced, interest bearing or not? Nothing in my research has so far made me doubt that.