Can I ask for some advice here.
Plan is as follows
Company A, owned by father of family, sell property (commercial) to Company B, owned by children. Both are "close" and they are "associated"
Purchase is financed by loan of funds from A to B. ie no cash changes hands. Bar some funds to cover SDLT and fees.
Property is to be developed and generate significant profit.
B will repay loan plus interest etc from the funds generated by the development and sale of the property.
The sale and loan will be fully legally documented and interest will be charged at a commercial rate.
My concern is that the loan from A to B could be considered a "loan to participators" and a s455 charge levied.
Timing could reduce this likelihood but i suspect time involved in development will mean the issue needs addressing.
My reading indicates the B may be regarded as invisible and therefore a loan to the shareholders, who are participators by virtue of control and connection.
Unless B can prove the purpose of the loan is for its trade, property development in this case. Or A is in the business of money lending, which it isnt.
Thoughts or possibly alternate structures to achieve same.
thanks
Related resources
Replies (1)
Please login or register to join the discussion.
I would be more concerned re the value placed on the sale given the "significant profit" comment, are you happy they can defend a challenge re value used re the sale?
I have never had a s455 issue re company to company lending , however I do not do that much work in practice these days. I do have a s455 investigation currently ongoing right now where there are inter company loans but these have not featured as an issue with the Inspector, her concerns have been more re a loan to a partnership and associated company issues.