Share this content
0
567

Loan from partnership to Ltd Co

One of the partners is also the sole director of the Ltd Co

Didn't find your answer?

Search AccountingWEB

I am seeking for a second opinion on the issue. If a partnership loan money to one of the parnerts who starts another business which is then incorporated where the said partner is the sole director and shareholder, would that trigger s455 CTA on the balance of the loan (which is owed to the partnership)? Also, do you agre that s175 ITEPA 2003 applies to that balance?

Replies (14)

Please login or register to join the discussion.

Scalloway Castle
By scalloway
24th May 2019 23:58

I thought s455 CTA applied to money lent by the limited company, not on money lent to it.

Thanks (0)
Replying to scalloway:
avatar
By Tax Dragon
25th May 2019 00:24

I wish I'd seen your post before I typed mine! You've said it so much better.

Thanks (0)
avatar
By Tax Dragon
25th May 2019 00:25

You need to come up for air half way through your megasentence. You know, the one that puts about 5 transactions together as if they were one.

I think if you break it down a bit you might realise where your thinking has gone off the rails. At which stage do you think the tax charges you mention arise?

If that doesn't help, reread the sections and ask yourself who (or what) pays what tax when they lend? Who or what pays what tax when they borrow? Who or what has lent? Who or what has borrowed?

Thanks (0)
Replying to Tax Dragon:
avatar
By jvenegas16
26th May 2019 11:19

Sorry for the long sentence.

Thanks (0)
avatar
By jvenegas16
25th May 2019 16:17

Thank you for your comments. That is the view taken by HMRC on an enquiry on the partnership ongoing for over 3 years, and at the last minute they came up with that view of willing to apply both sections s455 CTA and s175 ITEPA 2003 on the balance owed to the partnership by the ltd company.

Thanks (0)
Replying to jvenegas16:
RLI
By lionofludesch
25th May 2019 17:09

I'm sure they are.

Very generous of them.

If you can confirm that this debt is a creditor in the company's books, ask HMRC to refer the matter to an officer who knows what he's talking about.

Thanks (0)
avatar
By tonycourt
25th May 2019 22:09

As others have said, on the information provided it's the company which owes the cash to to director and neither s.455 nor the cheap rate loan benefit rules apply.

Are you sure that's what HMRC are saying the charge relates to or has there perhaps been money lent by the company to the director or the partnership?

Thanks (0)
Replying to tonycourt:
avatar
By jvenegas16
26th May 2019 11:17

This the first communication received on the matter, after 3 years of enquiry on the partnership, but I have removed the names:

'As you are aware Mrs X is the 100% shareholding Director of the Ltd Co incorporated with Company House on 20/3/14, with the first CT accounts for Year-End 31/3/15, submitted on 30/6/16.

However as a result of my S12AC Enquiry into the Partnership return, on review of the accounts, banking records and through our previous discussions, I have discovered material pre-trading transactions for Mrs X's business activities.

My review of the Debit/Credit transactions made via the Partnership bank account confirmed purchases of stock between 19/6/13 – 28/3/14 with the nett balance being treated in the Partnership accounts, as a £ balance Debtor. Advised to be a business loan to Mrs X.

I now intend to treat the £ (balance) as a loan to Mrs X, as a linked Participator and account for the S455 CTA/10 interest due in respect of Ltd Co and resulting beneficial loan under S175/ITEPA/03 for Mrs X. Please consider this as HMRC’s view of the matter and discuss the situation with your client.'

That is how it was worded. Mrs X is a partner in the partnership.

I do not agree with the tax inspector, but I was wondering if I was missing something. Bear in mind that clients tend to go along with HMRC (maybe because of fear, or any other reason).

Thanks (0)
Replying to jvenegas16:
RLI
By lionofludesch
26th May 2019 15:08

jvenegas16 wrote:

My review of the Debit/Credit transactions made via the Partnership bank account confirmed purchases of stock between 19/6/13 – 28/3/14 with the nett balance being treated in the Partnership accounts, as a £ balance Debtor. Advised to be a business loan to Mrs X.

I now intend to treat the £ (balance) as a loan to Mrs X, as a linked Participator and account for the S455 CTA/10 interest due in respect of Ltd Co and resulting beneficial loan under S175/ITEPA/03 for Mrs X. Please consider this as HMRC’s view of the matter and discuss the situation with your client.'

Oh dear.

You're dealing with a fool.

That said, there may be a restriction if Mrs X's Capital Account was overdrawn but it's not under the legislation quoted.

Thanks (0)
Replying to lionofludesch:
avatar
By jvenegas16
26th May 2019 15:21

In this case the tax inspector is a woman and she has been very difficult, as she thinks she is always right, taking things personally when being challenged, and she also reported me to her manager who contacted to find out what the problem was. All very weird.
Thank you for your views, which are in line with my own view. But I thought I would look for some comments on that from other fellows.
She wanted to open an enquiry on the Ltd Co, and trying to be smart, she issued the enquiry letter very close to the deadline but I received it late and I challenged her on that as it enquiry notice was out of time. She did not take it very well and tried to blackmail me, with a review of the company's VAT.
That is what I am dealing with at present.

Thanks (0)
Replying to jvenegas16:
RLI
By lionofludesch
26th May 2019 15:36

jvenegas16 wrote:
She did not take it very well and tried to blackmail me, with a review of the company's VAT.

I wouldn't be above making a formal complaint about that.

So - was the partner's combined Capital and Loan account overdrawn at any time ?

Thanks (0)
Replying to jvenegas16:
avatar
By atleastisoundknowledgable...
26th May 2019 17:37

jvenegas16 wrote:

In this case the tax inspector is a woman

Relevance?

Thanks (1)
Replying to lionofludesch:
RLI
By lionofludesch
26th May 2019 15:37

lionofludesch wrote:

Oh dear.

You're dealing with a fool.

Here's a thought.

Ask the HMRC lass which box the s455 charge fits in on the partnership return.

And where the BIK goes - for a partner.

That'll fox her.

Thanks (0)
Psycho
By Wilson Philips
25th May 2019 22:22

Who are the partners?

Thanks (0)
Share this content