Borrowing surplus cash from company to fund residential property purchase

[Sofia1]

I am a director of a small business and we have surplus cash in the company of around £150k. To withdraw it would result in a significant personal tax liability so I plan to leave it in the business for the time being. However, I am about to purchase a new house and coincidentally the mortgage shortfall is £150k. It would be ideal therefore to borrow from the company - presumably paying it back at a rate that is much less than a mortgage company. However, I believe that, under current company law, directors cannot strictly be given a loan by a company, and that Sarbannes Oxley has tightened the grip on this issue. What options do I have if any?! Or do I have to wait until the law changes or simply borrow from a mainstream lender? Again I understand that the DTI is looking into this matter and things might loosen up but my knowledge is scant. Any suggestions most welcome, many thanks.

[JasonButcher]

I cant comment on your problem as not to hot on company law - but one thing to watch out for is that too much cash in the busineess i.e a large surplus can effect your business asset taper relief for capital gains tax-you might want to speak to your accountant about this.

[ad]

the law aspect of the question is not for me to answer - however if you receive a loan - which exceeds £5000 at any point in the tax year - from the company and are paying interest back at a rate less than the official rate of interest as set by the Inland revenue there will be a taxable benefit in kind on the difference.

Also if your company is a close company, any directors loan account that isnt cleared within 9 months of the end of the accounting period in which it was made will have to pay S419 tax of 25% on the balance at that 9 month point. This tax (or part of )is however refunded when the loan (or part of) is repaid to the company.