Directors Loan or Intercompany Loan
Discussion
Evening all ,
One of my companies has just borrowed £100k as it had plenty of equity in the assets it holds .
I plan to use this to fund 3 deposits for 3 buy to let houses .
I want to transfer this £100k from company 1 to company 2 which was specifically set up as a buy to let SPV.
What’s the best way to do this from an accounting or indeed tax point of view .
A/ just transfer to company 2 and treat it as an intercompany Loan, Jon done.
B/ pay it out to both directors 50/50 as a repayment of company 1 directors loan , and then both directors loan this to company 2 as a directors loan.
Does it even really matter ? No interest will be paid etc .
Thanks
One of my companies has just borrowed £100k as it had plenty of equity in the assets it holds .
I plan to use this to fund 3 deposits for 3 buy to let houses .
I want to transfer this £100k from company 1 to company 2 which was specifically set up as a buy to let SPV.
What’s the best way to do this from an accounting or indeed tax point of view .
A/ just transfer to company 2 and treat it as an intercompany Loan, Jon done.
B/ pay it out to both directors 50/50 as a repayment of company 1 directors loan , and then both directors loan this to company 2 as a directors loan.
Does it even really matter ? No interest will be paid etc .
Thanks
When you say "better", what would you classify as "better".
Effectively, the entity that does the borrowing will get tax relief on the interest and other charges being levied on the loan.
There are significant discrepancies between how a company can obtain tax relief on property related loan interest compared to individuals.
However, companies only pay Corporation Tax at 19% compared to individuals paying Income Tax at a complicated array of rates which can climb to 45%.
There is also the Capital Gains tax issues arising when the property is eventually disposed of. None of this is straightforward.
Effectively, the entity that does the borrowing will get tax relief on the interest and other charges being levied on the loan.
There are significant discrepancies between how a company can obtain tax relief on property related loan interest compared to individuals.
However, companies only pay Corporation Tax at 19% compared to individuals paying Income Tax at a complicated array of rates which can climb to 45%.
There is also the Capital Gains tax issues arising when the property is eventually disposed of. None of this is straightforward.
Better from an ease point of view.
My company1 borrowed the £100k and I want to give it to company 2. Company 2 will at some point years from now pay back company 1. Company 1 doesn't want any interest etc, just its money back at some point.
Am I better off just doing a bank transfer from company 1 - company 2 and call it an intercompany loan OR stick £50k each into both directors accounts, mark it has part payment of the directoe loan we made to company 1 years ago, and then lend it to company 2 as a brand new company loan.
My company1 borrowed the £100k and I want to give it to company 2. Company 2 will at some point years from now pay back company 1. Company 1 doesn't want any interest etc, just its money back at some point.
Am I better off just doing a bank transfer from company 1 - company 2 and call it an intercompany loan OR stick £50k each into both directors accounts, mark it has part payment of the directoe loan we made to company 1 years ago, and then lend it to company 2 as a brand new company loan.
If you are purely looking for the simplest way of doing this, then just show it as an intercompany loan between the two companies. Working it through directors' loan accounts would not make it easier as it adds an extra layer of complexity to the accounting - and could cause tax problems.
Gassing Station | Business | Top of Page | What's New | My Stuff