Taking short term loan from company tax free

A

Aladdin

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As above, and taking into account the 10% assets rule, it is possible for a company director to borrow a sum of money short-term (say 6 months) from his limited company WITHOUT incurring a taxable event on either the personal or company side? Like the equivalent of a bed and breakfast - in and out same year or somesuch? Seeing a lot of info re longer term loans but nothing much re a quick in and out.

Background: Want to buy house while also selling and considering using excess company cash as a form of 'bridging' loan if needs be.
 
Specifically re tax, it's subject to BIK.

Preferential loans

A preferential loan is a loan made by you to your employee or former employee, or their spouse.
www.revenue.ie www.revenue.ie

Edit to add, since you're a director, the company must also pay 25% of the loan amount as corporation tax, but this can be claimed back if the loan is repaid fully within 4 years.
 
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Hi Aladdin

Why does the company have so much cash? Have you considered taking the tax hit and having the cash in your hand?

People come up with all sorts of complicated strategies about leaving profits in the company to avail of Retirement Relief but they don't have the use of the cash when they need it personally.

Brendan
 
Brendan Burgess said:
Hi Aladdin

Why does the company have so much cash? Have you considered taking the tax hit and having the cash in your hand?

People come up with all sorts of complicated strategies about leaving profits in the company to avail of Retirement Relief but they don't have the use of the cash when they need it personally.

Brendan
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Hi Brendan,
I don't want to have to pay the higher rate of tax on it as salary, especially since I don't actually need the money per se, just access to it in order to complete on a new one house when there's a gap between funds coming through from sale of my old one. I'll be back in the black once it does so I don't need excess cash after the fact.
 
Aladdin said:
I don't want to have to pay the higher rate of tax on it as salary,
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So you pay Corporation Tax on the profits instead?
And then when you eventually take it out you pay Income Tax or CGT on the net amount after CT.


Unless you are going to pull some genie out of the bottle, you will be taxed twice instead of once.

Brendan
 
Brendan Burgess said:
So you pay Corporation Tax on the profits instead?
And then when you eventually take it out you pay Income Tax or CGT on the net amount after CT.
Brendan Burgess said:
So you pay Corporation Tax on the profits instead?
And then when you eventually take it out you pay Income Tax or CGT on the net amount after CT.


Unless you are going to pull some genie out of the bottle, you will be taxed twice instead of once.

Brendan
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Except company cash on hand and profit are not the same thing. His company could be loss-making yet still cash rich. ‍♀️
 
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Except company cash on hand and profit are not the same thing. His company could be loss-making yet still cash rich. ‍♀️
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How can a company accumulate cash if it loses more money than it earns?
 
T McGibney said:
How can a company accumulate cash if it loses more money than it earns?
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By magic!!!


The OP seemingly was 'advised' to accumulate funds in the company, but was 'sketchy' on details 2 years ago.

Why they don't ask the same accountant that provided that advice re taking loan from company is puzzling though.

What should we do with secondary limited company income?

Age: 32 Spouse’s/Partner's age: 31 Annual gross income from employment or profession: 70,000 (+ limited company income started March 2021 gross 3500 pm but erratic, not counted in take home pay as wish to build up first) Annual gross income of spouse: 38,000 (due to drop to 0 in September...
www.askaboutmoney.com
 
RedOnion said:
Specifically re tax, it's subject to BIK.

Preferential loans

A preferential loan is a loan made by you to your employee or former employee, or their spouse.
www.revenue.ie www.revenue.ie

Edit to add, since you're a director, the company must also pay 25% of the loan amount as corporation tax, but this can be claimed back if the loan is repaid fully within 4 years.
Click to expand...

Do you have any more info in relation to the 4-year time limit here? I'm not aware that there is a time limit on repaying the loan to get the tax back
 
DB74 said:
Do you have any more info in relation to the 4-year time limit here? I'm not aware that there is a time limit on repaying the loan to get the tax back
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Myself and grammar weren't getting along that day!
You're correct of course, there is no time limit on the loan being repaid, but the tax must be reclaimed within 4 years of the loan being repaid. Not sure why I said what I said - I must have been going through something else at the time.
 
RedOnion said:
By magic!!!


The OP seemingly was 'advised' to accumulate funds in the company, but was 'sketchy' on details 2 years ago.

Why they don't ask the same accountant that provided that advice re taking loan from company is puzzling though.

What should we do with secondary limited company income?

Age: 32 Spouse’s/Partner's age: 31 Annual gross income from employment or profession: 70,000 (+ limited company income started March 2021 gross 3500 pm but erratic, not counted in take home pay as wish to build up first) Annual gross income of spouse: 38,000 (due to drop to 0 in September...
www.askaboutmoney.com
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Because the accountant tends to go off on a long rigmarole so I knew I'd get a straight answer here! :) Yes, we're accumulating cash to avail of retirement relief plus any other excess cash goes to pension, so corpo tax liability as low as possible.
 
Aladdin said:
Because the accountant tends to go off on a long rigmarole
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The rigmarole is the important bit you pay them for.

Make sure the retirement relief plan is written down, and you understand it. You might not be able to get retirement relief on 'excess cash', but it is dependent on the circumstances.
 
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