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Where Taxpayers and Advisers Meet

Loan From Director/Shareholders

HectorsFolly
Posts:5
Joined:Wed Aug 02, 2017 1:30 pm
Loan From Director/Shareholders

Postby HectorsFolly » Thu Oct 26, 2017 2:30 pm

Good afternoon,

H/W director-shareholders have invested c£75k into their trading company. They have charged interest at what I understand is a commercial rate. The funds appear to have been comfortably soaked up into working capital (the loan is several years old and there is no record of the original purpose) and there are no investments on the balance sheet, but a bank balance of £50k on a company with £2million Turnover, etc. In other words, the funds are not languishing in a deposit account earning 0.00001% interest.

But the loan has previously been treated as a NON-Trading Loan Relationship. Surely if the funds were applied for trading purposes, then the loan is a trading loan relationship, even though funds were lent by associates, etc?

Much obliged for your thoughts.

Regards,

H

bd6759
Posts:4262
Joined:Sat Feb 01, 2014 3:26 pm

Re: Loan From Director/Shareholders

Postby bd6759 » Fri Oct 27, 2017 11:32 am

Presumably the directors felt this was the most appropriate way to describe the transaction. In the grand scheme, it doesn't really make any difference.

HectorsFolly
Posts:5
Joined:Wed Aug 02, 2017 1:30 pm

Re: Loan From Director/Shareholders

Postby HectorsFolly » Fri Oct 27, 2017 1:59 pm

If it did not make a difference, I would not be asking. Given that the directors are not tax experts, I am not convinced that their opinion as to whether it is Trading / Non-Trading amounts to even a diminutive mogul of beans.

Regards,

H


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