Hi there,
I think I know the answers to this, but I want to check!
I've been in the process of buying a wooden structure to use as a workspace for my new limited company. The purchase of which is being done in two instalments. The first instalment (deposit) was paid using my own money before my limited company was formed.
A couple of people have said that in terms of tax relief, although the limited company wasn't operating when the when the deposit was paid, that I could still use the concept of a Director's Loan transaction retrospectively in order to get my personal money repaid and take advantage of some tax relief.
Although I used my money to pay for the deposit (before the company was formed), I've been told to see this as me loaning personal money to the company for the company to make a purchase. So in effect, I've added credit to the Director's Loan account, which now needs paying back as the company is now operational.
The bit I'm muddy on, does my company / me benefit from making tax-free loan repayments AND also logs the purchase as a cost for additional tax relief? My gut says this is not the case. The way I see it, is that the company can benefit from 2 types of tax-relief purchases... those that it makes with it's own money and those that it makes with other people's money (via the Director's Loan account), and therefore can only benefit from tax-relief once... in my case only when paying back the Director's Loan.
Of course it goes without saying that all this will be neatly documented in the accounts and in letters to clarify the arrangement.
Many thanks for reading this and helping to clarify.
James
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