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Investment or Trade? lending to developers

Will lending personally to a developer be treated as a trade or investment income?

I have a potential client coming to see me, he's currently lending money to property developers to fund their builds. This is his and his wife's sole income. There are 4 loans currently, minimum duration is 12 months.

He's currently lending this via a limited company (him and his wife are sole shareholders, the current acountant is treating this as investment income), however it struck me that if this were deemed an investment then the tax would be much more beneficial for him if he lended personally (approx £50-60k per year income from the lending) PA, Starting rate & Savings rate? Potential for wife to lend personally too, no concern about extracting sums built up in the compnay or loss of ER.

Do I just need to consider the badges of trade or is there some other relevant legislation I should be aware of? I 've read BIM62201 however am not that clear.

There are contracts drawn up, I'm not sure of the number of transactions - 4 loans currently with minimum duration of 12 months, source of the finance is personal money.

Thanks.

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06th Dec 2018 11:47

Quote:

... I'm not sure of the number of transactions, however I would imagine low ....

As the source you quote says "The number of lending transactions is also significant", do you not think it might be worth asking?

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By JosephK
to Accountant A
06th Dec 2018 12:08

Thanks AccountantA, I was awaiting the information from the client as now edited in my original post - 4 loans currently. Loans are a minimum of 12 months duration.

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