Account placed into Trust

by **marc02** on Wed Oct 19, 2011 5:04 pm

I have a Ltd company and have taken a loan. I do not need to spend all the loan at once and would like to place the loan into a savings account. I will draw down as I need to.

The best interest rates are in personal savings accounts and not business saving accounts. Is it possible therefore to open a saving account in my own name, and write the account into a trust for the sole benefit of the business? The aim is so I am not taxed on the loan money as if it was pain to me as a benefit. - Which of course it has not, and is for the business sole use.

Thank you

by **section 44** on Wed Oct 19, 2011 5:21 pm

A banking, not tax, question.

by **maths** on Wed Oct 19, 2011 5:26 pm

A company cannot open a personal account. Hence, it is not possible for you to open it with the interest then being that of the company.

by **section 44** on Wed Oct 19, 2011 5:33 pm

I suspect that a bank would want to know to whom the interest beneficially belongs and that there will likely be something in its terms and conditions effectively preventing you from opening an account as an undisclosed nominee.

by **marc02** on Wed Oct 19, 2011 10:02 pm

If the account is already open with a zero balance, can I assign the account making the business the trustee and beneficiary. Following which I will then place funds from the business banking account into this account.

Appreciate there may be restrictions in the T&C of the account preventing it from being written into trust, and this would be an issue with the bank. This aside, from an HMRC perspective would it work?

by **maths** on Wed Oct 19, 2011 10:48 pm

If you have opened the account personally then any attempt to transfer a "personal" account into the name of the company will be invalid under the T & C of the account and thus for tax purposes the transfer will be void and any interest on the account will be subject to tax on your part.

by **section 44** on Thu Oct 20, 2011 9:59 am

marc02 wrote:Appreciate there may be restrictions in the T&C of the account preventing it from being written into trust

What you suggest here:

marc02 wrote: assign the account making the business the trustee and beneficiary

Wouldn't involve any trust because the company would hold the account absolutely.

Given banks' know your client requirements (for money laundering and proceeds of crime reasons) do you not think that it would render such compliance procedures redundant if, as you suggest, one person could open an account and then unilaterally transfer the account to a different person?

by **Incredulum** on Thu Oct 20, 2011 12:06 pm

The bank would withhold basic rate income tax, and would notify HMRC that you had the benefit of it.

A company does not have income tax withheld on interest.

by **marc02** on Sun Oct 23, 2011 5:43 pm

My accountants solution is to place the funds into the personal account and move the same funds back into the business account within the same tax year. This being the case I am advised will mean that the funds are not treated as renumeration to myself - which of course they are not anyway, as I would only be holding the funds for the care of the company.

The question then arises, can I keep the gross interest earned? Or do I need to transfer the interest back to the company and declare it on the accounts? If I keep the interest myself do I need to pay income tax on it?

by **Generix** on Mon Oct 24, 2011 10:04 am

Interest rate on loans are higher than interest received in savings/deposit accounts.

Therefore why not arrange for a business overdraft facility instead? Usually these are cheaper when you are not spending the cash all in one hit.

Once at your limit, it might then be cheaper to change overdraft>loan.

Taking a loan in excess of what is needed and sticking it in savings rarely has any benefit.

Is there any reasoning behind this approach?