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Where Taxpayers and Advisers Meet

Business purchase with a Director's loan... double tax relief?

mrizzard
Posts:1
Joined:Tue Apr 19, 2022 9:13 am
Business purchase with a Director's loan... double tax relief?

Postby mrizzard » Tue Apr 19, 2022 9:45 am

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

pawncob
Posts:5090
Joined:Wed Aug 06, 2008 4:06 pm
Location:West Sussex

Re: Business purchase with a Director's loan... double tax relief?

Postby pawncob » Thu Apr 21, 2022 9:54 am

You can't lend money to a company that hasn't been formed yet.
Has the company purchased the building, or is it in your name?
What "tax relief" are you proposing to claim?
With a pinch of salt take what I say, but don't exceed your RDA

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

Re: Business purchase with a Director's loan... double tax relief?

Postby bd6759 » Mon Apr 25, 2022 9:16 am

I think you are confused. The company doesn’t get tax relief for returning your money to you. Repaying a loan is not a qualifying expense.


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