Loan from one company to another

[bb98]

Hello all,

I'm hoping this is a relatively simple question (!) but I currently own two companies, a profitable consultancy and a newly formed property company. My intention is to lend £100,000 from my consultancy to the property company to fund the purchase of a first property.

Is the loan as simple as recording that the consultancy has loaned the £100k to the property company, and specify the interest rate and duration of loan? Can I structure the loan over 25 years and at a rate of, say, 3.5? Are there any rules on interest rate levels or the value of loan?

I'm hoping this is relatively straight forward but I am happy to be corrected!

Your help would be greatly appreciated!

Many thanks

[Incredulum]

Are the companies in the same group? i.e. does Oldco own Newco, or vice versa?

[Generix]

Hello all,

I'm hoping this is a relatively simple question (!) but I currently own two companies, a profitable consultancy and a newly formed property company. My intention is to lend £100,000 from my consultancy to the property company to fund the purchase of a first property.

Is the loan as simple as recording that the consultancy has loaned the £100k to the property company, and specify the interest rate and duration of loan? Can I structure the loan over 25 years and at a rate of, say, 3.5? Are there any rules on interest rate levels or the value of loan?

I'm hoping this is relatively straight forward but I am happy to be corrected!

Your help would be greatly appreciated!

Many thanks

If you do properly own them both (and the property business is making standard or zero rated supplies for VAT) then you should VAT group the companies, as the loan (interest) would be an exempt supply making your consultancy business partially exempt. (If you VAT group the supply is ignored for VAT purposes).