Discussion
Prizam said:
If a LTD company "loan" an asset from a director of another LTD company, then repays them as a directors loan. Then do they have to pay tax on the directors loan repayments?
Or does this only apply to cash loans?
You are not explaining yourself well.Or does this only apply to cash loans?
Do you mean borrows an asset?
It's not a directors loan because the individual is not a director of the borrower.
I think the borrower would need to document it as an asset purchase instead, with the consideration being deemed the cash borrowing and then the borrowing can be repaid free of tax. The value of the asset would need to be appropriate market value.
Hi,
Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
The asset in this instance is a building. At the point of the loan, the asset in effect transfers hands and we start going down the property law route. Stamp duty must be paid at its persevered value on the day of transfer.
There is another aspect of TAX law, where by the owner who has written off the business associated with the property can make use of "Entrepreneurs TAX relief".
Apparently a 1.4m life time allowance. This is my next avenue of investigation.
Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
The asset in this instance is a building. At the point of the loan, the asset in effect transfers hands and we start going down the property law route. Stamp duty must be paid at its persevered value on the day of transfer.
There is another aspect of TAX law, where by the owner who has written off the business associated with the property can make use of "Entrepreneurs TAX relief".
Apparently a 1.4m life time allowance. This is my next avenue of investigation.
Prizam said:
Hi,
Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
The asset in this instance is a building. At the point of the loan, the asset in effect transfers hands and we start going down the property law route. Stamp duty must be paid at its persevered value on the day of transfer.
There is another aspect of TAX law, where by the owner who has written off the business associated with the property can make use of "Entrepreneurs TAX relief".
Apparently a 1.4m life time allowance. This is my next avenue of investigation.
I am now very confused. Ltd Company A has loaned a company asset to Ltd Company B. What does repaying a directors loan have to do with this?Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
The asset in this instance is a building. At the point of the loan, the asset in effect transfers hands and we start going down the property law route. Stamp duty must be paid at its persevered value on the day of transfer.
There is another aspect of TAX law, where by the owner who has written off the business associated with the property can make use of "Entrepreneurs TAX relief".
Apparently a 1.4m life time allowance. This is my next avenue of investigation.
Prizam said:
Hi,
Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
The asset in this instance is a building. At the point of the loan, the asset in effect transfers hands and we start going down the property law route. Stamp duty must be paid at its persevered value on the day of transfer.
There is another aspect of TAX law, where by the owner who has written off the business associated with the property can make use of "Entrepreneurs TAX relief".
Apparently a 1.4m life time allowance. This is my next avenue of investigation.
So let's say I own a building in Company A. I let company B, which I also own, use that building, and in return, company B pays a regular sum which pays back the shareholder loan to company A and that sum is tax free? You must be misinformed, because, if that were the case, it would be one of the biggest corporate tax arbitrages in history.Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
The asset in this instance is a building. At the point of the loan, the asset in effect transfers hands and we start going down the property law route. Stamp duty must be paid at its persevered value on the day of transfer.
There is another aspect of TAX law, where by the owner who has written off the business associated with the property can make use of "Entrepreneurs TAX relief".
Apparently a 1.4m life time allowance. This is my next avenue of investigation.
The facts are so unclear. Loaning an asset is just that, a loan of the asset, ultimately resulting in the asset being returned. In this case propety seems to turn to cash. This in normal parlance looks like a sale of the property. With proceeds maybe left outstanding, and paid at a later date.
But wholly unclear.
But wholly unclear.
Prizam said:
Hi,
Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
I really do suggest you talk to a proper tax adviser. The statement above does not make legal sense at all.Yes. I have taken professional TAX advise.
In short. A LTD company can loan an asset to another. So long as that person is a director of both LTD company's then the lending of that asset can be paid back via a directors loan. TAX free.
As far as I can see the following could make sense:
Option 1:
Director X who is a director of both company A and company B loans company A an asset, lets call it G. If X does not 'sell' G to A then there is no directors loan to repay, it would be rent in this case because it is a building.
If company B now uses the building instead of A then B would take over the rent payments, but, again it is is not repayment of a directors loan. In both these deals X would have to declare the income for tax purposes.
Option 2:
If however, X and A agree that this is in fact a sale to A by X and both agree that the market value of G is £Y. This amount Y is then being treated as a loan by X to A and be repaid to X by A. In this case X would potentially have to pay capital gains tax on the sale of G to A but, the loan repayment is genuine so no tax implication.
Now B wants to use the asset G instead of A. A loans G to B. Since A is the legal owner B must pay A rent for the asset, not X. If it is a sale then B could borrow money from X to pay A. B then owns the asset and can repay X's loan to B. A would also likely have to pay off the remainder of any loan by X as part of the agreement.
However, this would give rise to potential stamp duty if it is a building, so A and B should both be paying stamp duty on transfer. A would also potentially have to sell to B at market value £Z so would also potentially be in for tax on profit on sale as well (Z-Y).
If A is only loaning G to B then the directors loan is still with A therefore could not be paid by B.
I cannot see any other potential scenario. Can anybody else?
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