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Potential Tax Issue

Potential Tax Issue

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Hello
my client is a doctor and he has a private clinic. He has accuulated over £100k in his company account.  
He wants to create a new company to develop his home to mske it suitable to let, so he wants his medical company to loan £100k to his property company, and when the property company makes profit, it will repay the loan and pay its own corp tax.

Does anyone see any potential tax implications on the director?

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By Wanderer
20th May 2020 02:21

Russell Huk wrote:
Potential Tax Issue

Hello
my client is a doctor and he has a private clinic. He has accuulated over £100k in his company account.  
He wants to create a new company to develop his home to mske it suitable to let, so he wants his medical company to loan £100k to his property company, and when the property company makes profit, it will repay the loan and pay its own corp tax.

Does anyone see any potential tax implications on the director?

Yes, lots.
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Replying to Wanderer:
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By Russell Huk
20th May 2020 03:37

Hello
Please can you expand.
Thanks

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Replying to Russell Huk:
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By Wanderer
20th May 2020 04:29

Sorry, thought I'd given a very specific reply to your question.

What tax issues do you envisage may be relevant? You've only asked about the director, do you not envisage any tax issues for the company as well?

One hint, at present the new company doesn't appear to have an income source to make the profit, repay the loan and pay the Corporation Tax.

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By Tax Dragon
20th May 2020 06:26

£100k of company money spent developing the director's home? Yeah, I see tax issues for the director.

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By memyself-eye
20th May 2020 07:29

Maybe the doctor should stick to 'doctoring'

Ah, I see, he is doctoring.....

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By lesley.barnes
20th May 2020 09:23

As others have said this doesn't make any tax or business sense. Is the doctor selling his home to the property company he is setting up as a rental property if so were is the money coming from to buy his house? You mention £100k for building work but nothing for purchase of house. Is he just setting up a property company to do the building work and keeping the property in his name? If so how is the property company going to be paid by the home owner to repay the £100k the loan?
When you've asked these questions it should be obvious that the director is renovating his own property and doesn't want to pay tax on either dividends or directors loan. Whether he moves out and lets it at a later date you only have his word for that.

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