Bare Trust / Ltd Company / Parent Lending Funds to Company

[ukproptoppy]

We have a Bare Trust set up by grandparents for their 2 grandchildren.
There is total £250k of capital.
The parent of the children wants to buy a property for £350k.
I understand if the parent lends £100k to the children to help fund the purchase then 100/350 of the income is subject to income tax on the parent, as they have provided that % of the capital.
I then have 2 questions which would be great to get some thoughts on:-
1. What happens if the grandchildren are made the sole shareholders of a Ltd, and the grandchildren then lend the Ltd the £250k (from their Bare Trust) and the parent lends the remaining £100k (for which he charges interest)? As a separate legal entity the parent is not making provision to the children but to the Ltd. Is it correct that the problem of 100/350ths of the income being assessed on the parent falls away? I would imagine so but just want to check.
2. There is some tax leakage of course as you have CT to pay that would be avoided if the grandchildren owned the property directly. So what would a reasonable interest rate be for the Children to charge the Ltd for the funds they have lent it from their Bare Trust? You could get tax coverage for a lot of the income by charging 8% for the money that would then be taxable direct on the grandchild and so use their personal allowance. Is there anything they need to be careful of here?
Many thanks in advance for your thoughts.

[AdamS93]

Sounds okay to me - but whether or not it is the most tax beneficial way to do it, I wouldn't say so.

Company will pay SDLT at higher rates for starters whereas the grandchildren may be first time buyers?

As for an interest rate you can use, you will be able to use a commercial interest rate - 8% sounds steep to me. The loan is effectively secured on a property (i.e. if the company went insolvent, the property would get sold and the majority of the loan will be repaid I would suspect therefore fairly low risk) - therefore, you are looking at 3-4% in my opinion as this would be deemed to be a commercial mortgage rate in the current climate - this is quite subjective though.

[ukproptoppy]

Thanks Adam it is a commercial property so no SDLT disadvantage.
Also market rates for commercial mortgages are more like 5.0% so will suggest this.
Then the question is does the company have to hold back 20% on interest payments to a shareholder? + can you get a credit for this on the grandchild's tax return so you use their personal allowance in full?