Giving my own company a loan

T

Tipptop

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Hello all

I have just started a new company, and have secured finance personally for the company to purchase materials and equipment etc. Now I was just wondering what is the best approach to invest it into my company as I want to get this money repaid back to my self over the next 10 years.

Can I put the money into my company account (Separate legal entity) and arrange standing orders to my own personal account as repayments or should I go about this in a different manner for tax reasons, I’m really not to sure which way to do it but I know the company needs the money.

Thanks for any advice
 
There shouldn't really be any reason why you can't treat this money as a loan to the company. Any money up to this value htat you extract from the business is thus tax free as it is treated as a loan repayment rather than drawings or income.
I have a similar structure to funding in my company, but I did make sure my accountant checked it over first......
 
Agree with the foregoing point.

Also, if you charge the company interest on the loan you've given them, you should check with your accountant if the 'excess interest' provisions applicable to close companies are relevant.

Basically, for most 'small companies' in Ireland these provisions restrict the amount of tax allowable interest which can be charged by you to the lower of 13% of the loan or 13% of the share capital including premium. Any amount in excess of this limit is treated as a distribution and will increase your Corporation Tax. It's only an issue if you intend to charge interest to the company, however.
 
Good information from the two previous posters.

The most important thing is to consider whether you should be paying yourself salary or repaying the loan.

If you need long term working capital, then leave profits in the company and pay tax on them at the lower Corporation Tax rate so that you can use the retained funds to repay the loan.

If you expect the company to be profitable in the long term, you should pay yourself a salary up to the maximum of the 20% tax rate before repaying the loan.

If the company is losing money and there is a risk that it might go into insolvency, then you should be repaying the loans before taking any salary.

I have seen many cases where companies have gone into liquidation owing their directors money where the same directors seem to have got salaries which were presumably taxed.

If the amount needed by the company is large, you might consider buying some expensive asset and leasing it to the company. That means that if the company fails, you will still own the asset. Leasing is messy from a tax point of view - so this probably only applies to property.

Brendan
 
If u have to borrow personally to invest the money in the company then any interest charged can be claimed in your personal form 11 and you can get relief at your marginal rate of tax.
 
If your company qualifies for the Seed Capital relief scheme (www.revenue.ie), as far as I am aware, you will need to buy shares in your company in order to claim the relief. A loan will not qualify you, afaik.
 
Thanks for some great advice there will be armed with information for my accountant:)
 
On a similar note,I am self employed and am considering changing my van which I usually do after 3 years and was wondering would there be any advantage in giving myself a loan from my personal SSIA fund and making repayments to my personal account. The business is not a registered company so maybe not ?
 
simplyjoe said:
If u have to borrow personally to invest the money in the company then any interest charged can be claimed in your personal form 11 and you can get relief at your marginal rate of tax.
Click to expand...


Is this the case with borrowing to purchase shares in a company??

I have came across this before and as far as i was aware the individual took the hit for the interest and that was that. I asked our accountant....

If the individual had nothing else going on only a loan to purchase shares in company and a salary can he still claim relief at marginal rate.
 
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