Hi hope you can help me with this one.

We have a limited company, we are builders and want to buy a new van, very simple.

Pickhill Construction ltd needs ?k to purchase this van, the bank will loan it to Pickhill with a directors assurance thingy at 14.99% APR over 36 months, meaning paying ?k in interest over 3 years..........Ouch!!!!

Is there anything to stop me (I am a company director) loaning Pickhill the ?k required over 36 months and me getting the 14.99% and therefore the ?k interest instead of the bank???

It would seem like a 'no brianer', bit too easy, where's the catch???
=============
Estwig,

There is nothing to stop you loaning money to the company but you, personally, will be liable to pay tax on the interest received from the company.

Regards.

David.
=============
Thank you David.

So is there an optimum amount of interest to charge Pickhill that makes it work in terms of paying personal tax on the interest???

Did that question make sense??


I will be putting these questions to my accountant, but it is good to get your head round things on here first.
=============
Estwig,

PM me your email address and I'll put together a spreadsheet for you that will do the sums.

David.
=============
Agreed. I am often loaning my company money, in many ways. It may be that I have to purchase flowers on my personal card because I didnt have the works card or many other similar ways.

Rather than charge the company interest, I see it as reducing tax on Divvy's etc, as the company is simply paying me back what it owes me.

I beleive as the person loaning your company money it is up to you what interest rate you charge!
=============
I beleive as the person loaning your company money it is up to you what interest rate you charge!

Absolutely right Martin, any rate you want. Whether or not it makes financial sense is another question!
=============
The company will have to deduct income tax on the interest paid to you and pay this to HMRC.
=============
The company will have to deduct income tax on the interest paid to you and pay this to HMRC.

Yes of course, sorry Estwig I should have made that clearer in my initial post.
=============
Good Idea Keith - you get it out without NI. Problem is that company gets tax relief at 21% and you pay tax at 40% maybe.

Have a word with your accountants and they will let you know whether it will work for you.

If the interest is credited to your loan account once a year, it is just one form to fill in and send off with a cheque to HMRC once a year. If you pay interest more frequently, you may need to complete quarterly returns
=============
Thanks everyone
and thank you David for the offer of the spreadsheet, but as everyone seems to think this idea's a goer, I'll put it to my accountant to get the finer points.

:)
=============
Problem is that company gets tax relief at 21% and you pay tax at 40% maybe.

But if there 40%, is there any mileage (sorry could not resist!) in Keith buying the van personally and leasing it to the company? There would be 100% tax relief available, I believe, and it would be better to use this against Keith's 40%, than against the companies 21%. Or am I dreaming?
=============