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  • Tax

    Borrowing from cash rich companies?

    Hi all,

    i have come to that point where i have run out of cash, i dont want to borrow from the banks at all. I have noticed a potential opportunity. Why can i not borrow from companies that have alot of cash in the bank. How can i propose using their money and essentially delaying there tax payments? is this an advantage for them? can anyone shed some light on how this is possible or whether it would benefit a company in any way?

    Thanks

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    It is theoretically possible to borrow money from any individual or entity, but most companies do not have it as part of their business model to be a lender to a third party.

    Furthermore, any entity that considers lending will want to see a business plan, a track record of previous success, and some form of security for the loan.

    There is nothing stopping you approaching anyone and asking for a loan, if you can provide those three things, but whether they will consider it or not is another issue.

    ​Hope that helps?

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    thanks for the response vanessa, at this stage i do not have an issue convincing the company to give me cash in-terms of whether its a good investment or not but im more trying to figure out whether there is a tax benefit for the company.

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    my accountant says if you are connected to the (ltd) co then this is not tax efficient.

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    You have three issues here:

    1) Companies should be concerned with consumer credit rules and mortgage regulations

    2) A company gets a deduction for costs not changing cash assets to loan assets. So there is no tax saving. However the interest earned would be taxable.

    3) if you are connected and there are many ways to be connected (including 5% ownership, directorships family) then there are additional taxes to consider.

    Im skeptical although but please keep us informed.

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    Chartered Accountant, Tax Advisor and Mortgage broker

    (and BTL portfolio owner)

    stuart@johnsonsca.com

    02039077022