Loan from grandparent

ian2507

Hi all

1st post here.

I run a business and I have been offered a loan to get me going from a grandparent and my main worry is tax that maybe due.

I need to find out what is the best way of doing it that means I pay little if no tax etc.

The amount is around £15,000 it can be called a loan or a gift that will be paid back,

I know that as a director of my company I (myself) can loan the company money.

Any help would be greatly received

paddyrg

Make them a shareholder/investor - keeps it clean?

ian2507

thanks for the quick reply.

Although on paper that sounds right I wound not want to get my nan involved in the business in that way.

you think there can be any other way, maybe loan me the money and not the business?

paddyrg

Shareholders have no duty beyond their holding, and cannot be held responsible for any debts of the company. You are still director, you make all the choices, and if things go well you can buy back her shares over time, or pay a dividend. All very simple and cheap to set up, and there is no need for her to be in any way 'involved'.

In fact... is your nan a taxpayer? If your business qualifies as doing R&D (you'd be surprised what does - movie making does, for instance) then she can get the tax back on that investment via EIS, so it could only cost her £9000 to invest £15k. Conditions apply, of course.

McKneff

If its a gift that has to be paid back, its not a gift, its a loan.

ian2507

thanks for the advice

I have an accountant but hate asking as they charge alot, and I am changing to a new accountant within weeks.

I guess I hoped somebody would say that as its family she could just give or loan the money and I pay her back no tax etc.

Forgive me for not knowing about this issue but only just started business and have zero idea about it.

paddyrg

There are limits and possibilities for tax-free gifts from grandparents, you may want to try the tax forum for more details?

And/or the small business one for your startup!!

Edit - a good accountant can save you money and keep you legal, don't assume cheaper is better in the long run. Some may have no idea about EIS for instance, where a good one/tax advisor could in certain circumstances magic £6k from thin air by structuring her investment cannily. Even at £80/hr, that's worth it!

ian2507

thanks will re post there

LovelyLeeds

ian2507 wrote: »

I guess I hoped somebody would say that as its family she could just give or loan the money and I pay her back no tax etc.

Forgive me for not knowing about this issue but only just started business and have zero idea about it.

Try this website: http://www.justanswer.com/sip/uk-tax?r=ppc|ga|5|Tax|Student+Loan+Tax&JPKW=loan%20tax%20implications&JPDC=S&JPST=&JPAD=7906148328&JPAF=txt&JPRC=1&JPMT=b&JPNW=g&JPCD=20110506&JPOP=TransAnswers&gclid=CJCx9erw1qkCFUwc4QodnCxT8Q
Yikes sorry it's so long, if it doesn't load type this into Google: tax implications of a family member giving loan for a business

Phew!