Director's loan - getting back the corp tax
Discussion
I am looking into taking out £200k-£300k as a loan from my ltd company to pay for some works, this will mean my company has to pay a big chunk, something like £60k-£90k corp tax as a 'temporary' hold. I expect to pay back the loan after 10 years.
It will all be done through accountants, I'm just interested in any real world feedback from people who have done this over a longer time period - say 5,10+ years - and see if anyone had issues claiming back the corp tax when the loan was repaid?
It will all be done through accountants, I'm just interested in any real world feedback from people who have done this over a longer time period - say 5,10+ years - and see if anyone had issues claiming back the corp tax when the loan was repaid?
Yes - don't do it.
It creates a whole world of pain.
Once you start reducing the loan, after the end of each accounting year you will have to WRITE (no phone calls, e-mails or texts allowed) to HMRC providing them with detailed evidence of the reduction on the loan and formally apply for a refund of the relevant portion of the S.455 Corporation Tax. Based on what you are saying, you will be doing this as a separate exercise for over a decade.
Separate disclosure also has to be made in the company accounts of the amount outstanding each year and the terms and conditions of the loan.
It creates a whole world of pain.
Once you start reducing the loan, after the end of each accounting year you will have to WRITE (no phone calls, e-mails or texts allowed) to HMRC providing them with detailed evidence of the reduction on the loan and formally apply for a refund of the relevant portion of the S.455 Corporation Tax. Based on what you are saying, you will be doing this as a separate exercise for over a decade.
Separate disclosure also has to be made in the company accounts of the amount outstanding each year and the terms and conditions of the loan.
Eric Mc said:
Yes - don't do it.
It creates a whole world of pain.
Once you start reducing the loan, after the end of each accounting year you will have to WRITE (no phone calls, e-mails or texts allowed) to HMRC providing them with detailed evidence of the reduction on the loan and formally apply for a refund of the relevant portion of the S.455 Corporation Tax. Based on what you are saying, you will be doing this as a separate exercise for over a decade.
Separate disclosure also has to be made in the company accounts of the amount outstanding each year and the terms and conditions of the loan.
Hi Eric, thanks for the feedback. Does not sound good... unfortunately I am at a loss as to an alternative. I refuse to take it as an additional dividend and then have to take nearly the same amount out again to cover the income taxes, I'd rather move overseas and never come back than hand that sort of money over again (been there done that with a big dividend in 2016 which I regret!).It creates a whole world of pain.
Once you start reducing the loan, after the end of each accounting year you will have to WRITE (no phone calls, e-mails or texts allowed) to HMRC providing them with detailed evidence of the reduction on the loan and formally apply for a refund of the relevant portion of the S.455 Corporation Tax. Based on what you are saying, you will be doing this as a separate exercise for over a decade.
Separate disclosure also has to be made in the company accounts of the amount outstanding each year and the terms and conditions of the loan.
Any ideas welcome.
I considered a directors loan a few years back. Not as much as you but think it was around £100k. Everyone, and I mean everyone, including my accountant, and people on here advised me not to. I did my own due diligence and couldn’t find anyone who would recommend it. I didn’t bother in the end. You’d be better off remortgaging the house and taking dividends over a couple of years.
JapanRed said:
I considered a directors loan a few years back. Not as much as you but think it was around £100k. Everyone, and I mean everyone, including my accountant, and people on here advised me not to. I did my own due diligence and couldn’t find anyone who would recommend it. I didn’t bother in the end. You’d be better off remortgaging the house and taking dividends over a couple of years.
For further info, I advanced money from my main co to pay for the works on the house already. Works are now done and house is complete with a lovely new valuation. But I now have 4 months left to repay my main co before it becomes a notifiable loan.The idea of this new formal loan from my hold co is to pay off that loan and all sorted.
I tried remortgaging (have £600K-£700k equity now works are complete) and they wouldn’t do it as they consider it debt consolidation - even though the funds were originally advance to pay for the works on the home. Argh!! I could buy this house tomorrow on a smaller deposit / higher LTV and we’d be all sorted!!
So I have all that equity, the same again as cash in company accounts, and yet I still can’t simply borrow a bit to tide us over a few years whilst we pay down the balance and avoid a £200k income tax bill this year. Stuck for ideas.
I have done it and it really wasn't an issue. It was over a shorter period of time and I didn't repay it in installments. Instead one lump sum payment after a few years. It also wasn't for one large loan, it was for several. There was a delay in getting the money credited back but that was due to Covid/ lockdown slowness. My accountant and Finance Director sorted the detail .. so it could have been a nightmare but I didn't get any earache!
Wind up your ltd co, take is as capital gains and then rent out your newly renovated house and go and live in New Zealand for 5 years to avoid the CGT? 
Perhaps look at a new mortgage through a different lender? Presumably you are on a mortgage with an early redemption charge, but may be worth taking the hit on that to switch it out?
Perhaps look at a new mortgage through a different lender? Presumably you are on a mortgage with an early redemption charge, but may be worth taking the hit on that to switch it out?
Greatesthit12 said:
I tried remortgaging (have £600K-£700k equity now works are complete) and they wouldn’t do it as they consider it debt consolidation - even though the funds were originally advance to pay for the works on the home. Argh!! I could buy this house tomorrow on a smaller deposit / higher LTV and we’d be all sorted!
Talk to a different mortgage broker would appear to be the simplest option.walamai said:
Wind up your ltd co, take is as capital gains and then rent out your newly renovated house and go and live in New Zealand for 5 years to avoid the CGT?
Perhaps look at a new mortgage through a different lender? Presumably you are on a mortgage with an early redemption charge, but may be worth taking the hit on that to switch it out?
Ha, if the whole family was up for it, I'd have no issue moving out to Portugal and enjoying 0% income tax on dividends for the next 9 years.Perhaps look at a new mortgage through a different lender? Presumably you are on a mortgage with an early redemption charge, but may be worth taking the hit on that to switch it out?
Yes... finding a different lender who will accommodate would be best solution by the sounds of things, I do have our mortgage broker working on it, fingers crossed someone will be happy to work with us on this. We do have a chunky ERC but it would potentially be mitigated by the lower rates on offer today.
Greatesthit12 said:
Yes... finding a different lender who will accommodate would be best solution by the sounds of things, I do have our mortgage broker working on it, fingers crossed someone will be happy to work with us on this. We do have a chunky ERC but it would potentially be mitigated by the lower rates on offer today.
Maybe try Sarnie?https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/profile.asp?h=...
Mr Pointy said:
Greatesthit12 said:
Yes... finding a different lender who will accommodate would be best solution by the sounds of things, I do have our mortgage broker working on it, fingers crossed someone will be happy to work with us on this. We do have a chunky ERC but it would potentially be mitigated by the lower rates on offer today.
Maybe try Sarnie?https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/profile.asp?h=...
Jonny TVR said:
I have done it and it really wasn't an issue. It was over a shorter period of time and I didn't repay it in installments. Instead one lump sum payment after a few years. It also wasn't for one large loan, it was for several. There was a delay in getting the money credited back but that was due to Covid/ lockdown slowness. My accountant and Finance Director sorted the detail .. so it could have been a nightmare but I didn't get any earache!
My instincts say the above is probably right.Eric Mc said:
Yes - don't do it.
It creates a whole world of pain.
Once you start reducing the loan, after the end of each accounting year you will have to WRITE (no phone calls, e-mails or texts allowed) to HMRC providing them with detailed evidence of the reduction on the loan and formally apply for a refund of the relevant portion of the S.455 Corporation Tax. Based on what you are saying, you will be doing this as a separate exercise for over a decade.
Separate disclosure also has to be made in the company accounts of the amount outstanding each year and the terms and conditions of the loan.
And Eric is saying no as being an accountant he hates all the extra work he has to do. As he says "you will have to write" when he actually means he will have to write It creates a whole world of pain.
Once you start reducing the loan, after the end of each accounting year you will have to WRITE (no phone calls, e-mails or texts allowed) to HMRC providing them with detailed evidence of the reduction on the loan and formally apply for a refund of the relevant portion of the S.455 Corporation Tax. Based on what you are saying, you will be doing this as a separate exercise for over a decade.
Separate disclosure also has to be made in the company accounts of the amount outstanding each year and the terms and conditions of the loan.
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