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  • Tax

    Tax relief on SPV deposit loan

    Hi guys, anyone out here familiar with/undertaken the process of loaning deposit funds from a Contractor Ltd Company to an SPV?

    I want to verify whether this method is viable and can be legitimately classified as a business to business loan under HMRC rules?

    Thanks in advance

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    Yes, I have done it after speaking to 3 different tax advisers and they all have confirmed this.


    One of them did say though that if they are owned by the same people then it might be considered as a beneficial loan or something so need to do some limited companies share holding arrangements.

    If you are treading this path then you already need a good property accountant so this is my strong advice to you.

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    Thanks PD this is helpful; yes I'll be treading this path later this month, so I will need a an experienced property accountant for this.

    Who do you use?

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    I like my accountant to be local - maybe I am a bit old school in that sense.

    So, I have spoken to a few in my area (Coventry and around) including Nigel Reynolds who also writes on PT. He is good but a bit slow in interactions.

    Thanks.

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    Pretty sure there is a thread on this but no beneficial loan for share holder if loan is company to company

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA

    Thanks for your response Debbie.

    I must admit this has confused the hell out me! As I said, I spoke to 3 different accounts who are all experienced and trustworthy and one say one thing and the other 2 something else.

    I then did (or tried to do) my own research and got even more confused as it was all in "accountancy" language (so not English :-), I tried to make the sense out of the HMRC/govuk/few blogs on this subject - none of which I totally understood.

    In the end I came to a conclusion, it seems to be a grey area as few think it is classed as beneficial loan and few do not and not all the tax advisors seem to understand it either. Therefore, I decided to be on the safer side of this and decided to go with the one who suggests it is classed as a loan. I agree though more tax advisors seem to think it is not but this being a legal matter, this is an objective matter not subjective.

    Again, not sure who is right and who is not - just being safe.

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    It is definitely not a beneficial loan if the money does not end up in the hands of the shareholders https://www.gov.uk/hmrc.../company-taxation-manual/ctm61580

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    Debbie Franklin

    Director of Tax Peplows Limited

    CTA ACA FCCA


    I agree with Debbie - not a beneficial loan. However I would advise a formal agreement is drafted to record the terms of the loan.

    HMRC have in the past successfully argued that money moved between companies under common control is a distribution to the owner (and then capital introduced to receiving company) thus giving rise to a substantial income tax liability on the shareholder.

    Making sure that any loan between the companies is a commercial arrangement should protect the shareholder.

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    Thanks for all your inputs. So if I've understood this all correctly, in summary a beneficial loan (whereby funds end up in the hands of the shareholder) will attract a higher tax rate than a commercial (business to business) loan?

    Thus it's important to ensure the terms of the agreement are worded correctly.

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