BTL using LTD company funds...
Discussion
Toaster Pilot said:
Eric Mc said:
And full disclosure of the nature of the arrangement is disclosed in the formal accounts of both companies.
Is this bit likely to cause problems with HMRC given the fact the two companies are completely unrelated sector/activity wise? The bigger problem will be whether this is acceptable to the mortgage lender, presuming that you're raising a mortgage as well.
My friend was forced to pay a dividend out from his trading company and then to use a directors loan to his SPV before the mortgage company would offer a BTL on the property. You should speak to a mortgage advisor that specialises in this field.
From HMRC perspective the companies will be considered 'connected' and this will have implications for how the debt is accounted for. For instance, how the debt and credit are accounted for, and should the SPV be unable to repay the loan the implications for the debt. I believe that you would be entitled to tax deduction from the trading company if the SPV fails to repay the loan. It may also cause complications in calculating any dividend payments for the trading company. You should speak to your accountant.
The bigger problem will be whether this is acceptable to the mortgage lender, presuming that you're raising a mortgage as well.
My friend was forced to pay a dividend out from his trading company and then to use a directors loan to his SPV before the mortgage company would offer a BTL on the property. You should speak to a mortgage advisor that specialises in this field.
From HMRC perspective the companies will be considered 'connected' and this will have implications for how the debt is accounted for. For instance, how the debt and credit are accounted for, and should the SPV be unable to repay the loan the implications for the debt. I believe that you would be entitled to tax deduction from the trading company if the SPV fails to repay the loan. It may also cause complications in calculating any dividend payments for the trading company. You should speak to your accountant.
Company A loans the money to Company B to purchase the BTL
Company B repays Company A via the income from the BTL
I do exactly this. Now have four mortgaged properties in the spv. No issues with hmrc or mortgage lender, Norwich & Peterborough BS. For extra security Co A also has a floating charge over all assets in Co B - which is second in line after the fixed mortgages obviously.
Hope this helps.
Company B repays Company A via the income from the BTL
I do exactly this. Now have four mortgaged properties in the spv. No issues with hmrc or mortgage lender, Norwich & Peterborough BS. For extra security Co A also has a floating charge over all assets in Co B - which is second in line after the fixed mortgages obviously.
Hope this helps.
MadProfessor said:
The bigger problem will be whether this is acceptable to the mortgage lender, presuming that you're raising a mortgage as well.
My friend was forced to pay a dividend out from his trading company and then to use a directors loan to his SPV before the mortgage company would offer a BTL on the property. You should speak to a mortgage advisor that specialises in this field.
From HMRC perspective the companies will be considered 'connected' and this will have implications for how the debt is accounted for. For instance, how the debt and credit are accounted for, and should the SPV be unable to repay the loan the implications for the debt. I believe that you would be entitled to tax deduction from the trading company if the SPV fails to repay the loan. It may also cause complications in calculating any dividend payments for the trading company. You should speak to your accountant.
Why is this a problem? The mortgage will be secured over the asset. Make the loan from company A non secured and non cash interest paying (ie PIK or non interest bearing), and it shouldn't cause any problems for a mortgage company. My friend was forced to pay a dividend out from his trading company and then to use a directors loan to his SPV before the mortgage company would offer a BTL on the property. You should speak to a mortgage advisor that specialises in this field.
From HMRC perspective the companies will be considered 'connected' and this will have implications for how the debt is accounted for. For instance, how the debt and credit are accounted for, and should the SPV be unable to repay the loan the implications for the debt. I believe that you would be entitled to tax deduction from the trading company if the SPV fails to repay the loan. It may also cause complications in calculating any dividend payments for the trading company. You should speak to your accountant.
OP should also note that the loan from company A to B is a connected party loan relationship, so no profits or losses on the principal. Interest will be taxable in A on an accruals basis, but relief for the interest will broadly only be available when paid. You can manage this by either having a non interest paying loan, or PIKing the interest. As noted above, it's unlikely the mortgage company would allow cash payment of interest to company A.
siheb said:
Company A loans the money to Company B to purchase the BTL Company B repays Company A via the income from the BTL
I do exactly this.
Do you own both co's separately? I am just in the process of doing this but planning on setting up a company that will own both my consulting business and property SPV's. Consulting co will the divi up to top co which then lends out to spv <- thought this approach would be 'cleaner' from HMRC perspective...I do exactly this.
Have a meeting in a couple of weeks with my accountant to discuss but would welcome thoughts beforehand.
Alpinestars said:
Why is this a problem? The mortgage will be secured over the asset. Make the loan from company A non secured and non cash interest paying (ie PIK or non interest bearing), and it shouldn't cause any problems for a mortgage company.
OP should also note that the loan from company A to B is a connected party loan relationship, so no profits or losses on the principal. Interest will be taxable in A on an accruals basis, but relief for the interest will broadly only be available when paid. You can manage this by either having a non interest paying loan, or PIKing the interest. As noted above, it's unlikely the mortgage company would allow cash payment of interest to company A.
One day, I hope to understand what this means OP should also note that the loan from company A to B is a connected party loan relationship, so no profits or losses on the principal. Interest will be taxable in A on an accruals basis, but relief for the interest will broadly only be available when paid. You can manage this by either having a non interest paying loan, or PIKing the interest. As noted above, it's unlikely the mortgage company would allow cash payment of interest to company A.
You're one clever sod !!!
Jockman said:
Alpinestars said:
Why is this a problem? The mortgage will be secured over the asset. Make the loan from company A non secured and non cash interest paying (ie PIK or non interest bearing), and it shouldn't cause any problems for a mortgage company.
OP should also note that the loan from company A to B is a connected party loan relationship, so no profits or losses on the principal. Interest will be taxable in A on an accruals basis, but relief for the interest will broadly only be available when paid. You can manage this by either having a non interest paying loan, or PIKing the interest. As noted above, it's unlikely the mortgage company would allow cash payment of interest to company A.
One day, I hope to understand what this means OP should also note that the loan from company A to B is a connected party loan relationship, so no profits or losses on the principal. Interest will be taxable in A on an accruals basis, but relief for the interest will broadly only be available when paid. You can manage this by either having a non interest paying loan, or PIKing the interest. As noted above, it's unlikely the mortgage company would allow cash payment of interest to company A.
You're one clever sod !!!
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