Is this legal?

[johndillon]

I own a ltd company.
I am also buying a house to live in. I want to use some money from the company.

So, what I want to do is get the company to pay 10% of the house price, Ill pay the rest. When the house is sold the company will get 10% of the money back, so could actually make a profit.

Is that legal?

[jamesconstantine]

Hi

unfortunately it is not lawful for directors to borrow money in this country over a certain limit. The tax implications of such borrowings are that the company will pay tax on the balance and you will pay income tax on the "perk".

Nevertheless, if the company already ows you money, there should't be any problem getting your loan repaid tax-free.

I suggest if the company has surplus cash that you look for ways to extract these profits out of the company to you in a tax-efficient manner and then use it to buy the property. For example, as dividends or rent or ... (whatever is applicable).

Alternatively, you may decide to purchase the property in the name of the company, although this doesn't sound to be a good idea in general for capital gains tax purposes.

I hope this helps.

James Constantine, Chartered Certified Accountants
http://www.taxadviceuk.com
FREE Weekly tax Tips for the small business owner in understandable language

[Instinctive]

You should state why you want the company to buy 10% of the house which you will use as your residence.

In theory, there is no reason why the company and you cannot buy the house in joint ownership of 10%/90% as you suggest.

However, as stated by James above, this doesn't make sense in tax terms.

Ramnik

[johndillon]

Well basically the company has money in the bank, Ive not taken a salary because Id loose tax on it.

So I was thinking the company could have joint ownership, and since I work from home, it kinda makes sense.

So would the company have to pay tax on the house, or only on the profit it made when the house was sold?