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  • Tax

    Ltd deposit source advice...

    Can I get some advice here...

    Let’s say I have a company with £100k cash

    Do I buy two property in this company £40k deposit each. Meaning I pay Corp tax on £80k

    Or do I loan a new company this money - the new company purchases the houses, and pays back the original loan money to company 1.

    many thanks.

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    Hi Binman

    I am a little confused by the start of your question.  How has the company you initially refer to received its cash?

    If the money was as a loan from you the then using that money to purchase properties does not give rise to a corporation tax charge.  The only point the company will have a corporation tax charge is when the company has made a profit from the letting of the properties or when it sells a property.  The tax payable on the sale of a property will be calculated on the difference between the selling price and the purchase price after adjusting for improvements and indexation relief.

    Regards

    Nigel

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    My understanding is if you give the company a deposit and you want to get the money back the company would have to pay corp tax first i.e. 19%

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    Learn Change and Adapt ?????


    Hi Binmand and Dislexic.

    If you introduce money to a company i.e. lend it money then that is no different to a bank, mortgage lender or angel investor lending the company money.  You can take that money back from the company whenever you want and there is no tax to pay on the money you originally loaned to the company.  The only point that tax will arise is if the company pays you interest on the loan in which case the company must deduct 20% tax and pay that to HMRC, your own tax position will depend upon your personal tax position.

    Regards Nigel.

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    So if I give money to my company for a deposit and the company paid me back the deposit money will it pay corp tax first ? Is it not treated just like a capital repayment after all the company now owns bricks and mortar  I know the director has no tax liability is that right

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    Learn Change and Adapt ?????


    Hi Dislexic

    No it is not a capital repayment by the company.  Yes it may own Bricks and Mortar but that is completely separate and a tax charge only arises when the property is sold not when the loan is repaid.  The only point that a Director would have a liability is if the company paid them interest as well as the original capital then depending upon their own tax position they may have to pay tax on the interest.

    Regards

    Nigel

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    Thanks for that that makes lending money to a company quite simple I thought the company had to pay corp tax first so I give it to the company and the company just pay me back no tax liability unless the company sells the property thank you agin

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    Learn Change and Adapt ?????


    Can I ask a further question when the company has a repayment mortgage will the company pay corp tax on the capital element of the mortgage

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    Learn Change and Adapt ?????


    If the 100k is profit on company income, then it I'd subject to chirp tax wether loaned our not

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    If the £100k arises from profits then yes there would be Corporation Tax to pay.

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