Thinking about going "limited", need advice...

Northern England.

Yes, I agree with this.

Quite. I need to keep my dopey accountant, but also employ the occasional services of a clued up business advisor to help me with the "initiatives" until I come up to speed by myeslf.

Excellent, that seems workable then.

Ok, is it possible to make a loan to the Director without penalties?

heh. Thanks. :->

You can't just go lending money willy-nilly forever. Loans have to be repaid, preferably in the same accounting year, or company law eyebrows will be raised.

"Reserves" in this context doesn't mean money in the bank, or even money in the bank minus money notionally owed to shareholders.

It means reserves of profit not paid out as dividends in previous years. If a company makes £20k profit in each of its first three years but pays out only £5k dividend in each of the first two, then it has built up £15k of ditributable reserves in each of the first two years, and could hence, in theory, distribute £50k of dividends in year three.

"john boyle" wrote

But isn't any loan from company to director, limited to no more than (something like) 5,000?

In message , Tim writes

Above that (or whatever the limit is) it can become taxable but I have never had a problem with letting it go higher until the end of year accounts are done.

So a director can borrow say £5k (or whatever the limit is) from his Ltd Co and class this as a "loan account". This can remain so until the year end at which point the loan must be either repaid or re-classified as either income, a divi or something else.

Is this loan legally interest free?

Perhaps the accounts were simply accepted at face value so Mr IR doesn't know about the actual amounts borrowed. :)

Yes but it would be a benefit in kind.

Well a balance sheet is only a snap shot!

Why do you need these deposits to be separate?

It makes no sense to me.

tim

I think you have been lucky.

I believe Tim is right. You need to account for Tax through the year if your drawings are not correctly recorded as dividends and would generate a tax charge if they were salary.

tim

It can remain as a loan but doing so generates a tax charge as if it were salary. The tax is refunded when the loan is repaid.

Up to 5K yes.

Mr IR won't find out unless you are audited, and then, if you have done it wrong, he will send you a bill.

tim

Which will be subject to a tax charge on the notional interest, once the sum exceed 5K.

I know that this looks easiest. It really isn't so.

tim

I really don't think that this is the best way.

Quarterly dividends really aren't that hard to organise.

tim

So I can spend them, tax free.

You don't have all the facts.

But no penalties [read: tax liability] if paid back prior to the year end?

Indeed.

So a loan taken and repaid within a single accounting year would attract no tax charges?

Excellent.

And that would fit nicely within my plans. Thanks.

They are not yours to spend (tax free or otherwise).

You said they were holding deposits. I.e deposits that you have to (eventually) give back.

You specifically didn't say that there were interim payments as part of the total billing (which you must put through the books just as any other payment)

Which is why I asked for some more!

tim

Oh well I shan't spend them then, thanks for clearing that up for me.

This is usenet, not a bloody confessional.