Repaying My Mother for Interest-Free Personal Loan from my LTD company

Ebe_Scrooge

Farrella wrote: »

There were multiple personal loans over 10 years: ...


2) Several for my LTD company

I'm sorry, you really DO need to speak to your accountant about this. First, you say "My limited company", yet in your first post you say "Can my LTD company (where I'm not officially the director, just the equal shareholder)"

If you're a shareholder of a company, then the company finances are nothing to do with you - you invest money, you get a vote on who the board of directors should be, you hopefully receive a dividend, end of. Just like when you buy shares in British Gas or whatever ( "if you see Sid, tell him", was that it ? )

If you're involved in the running of the business then it's different - especially if you've invested personal money.

You say "I will consult an accountant but first I have to find a good accountant" ... surely the company has an accountant ???? Speak to him/her, they will be best placed to help you - not least because they already know know the company's finances.

Farrella

I run the company's business but my partner is officially the director. We own equal shares. I can be Director if it's necessary.

We did ask our accountant and he was unwilling to give any tax advice. He said we need to find another accountant who is a tax advisor. Since we already pay him a fair sum, we were hoping that he'd be more helpful...

I thought this was a simple question but maybe it's not. Ultimately I just want to know if I can pay back my mother using money from the company's account without paying tax, when the loan contract is between me and her (though it specifies that the loan is for my investment in this LTD company's business).

BrassicWoman

The company absolutely cannot pay back personal mortgage related money

You also need to get clear on whether it was a loan from mum * to the company* or to you, and if that then became a loan from you to the company, or increased your equity in the company

You really do need an accountant, it's a bit of a mess!

Ebe_Scrooge

Farrella wrote: »

We did ask our accountant and he was unwilling to give any tax advice. He said we need to find another accountant who is a tax advisor.

I'd be getting shot of that accountant pronto, and engaging another one who knows what he's doing ! The whole point of having an accountant is to give tax advice. Well, OK, that's not his sole job - but it's a big part of it.

LMG1305

I would think as your mum gave YOU the money then that is a separate issue to the money in the business.

YOU loaned the company the money, not your mum. Get the money paid back to you then you can sort out paying your mum back.

As for the money she gave you for your mortgage, this has absolutely nothing to do with the business. You can pay her back from your own personal earnings if you can afford to, but that's it.

Jenniefour

Ebe_Scrooge wrote: »

I'd be getting shot of that accountant pronto, and engaging another one who knows what he's doing ! The whole point of having an accountant is to give tax advice. Well, OK, that's not his sole job - but it's a big part of it.

Couldn't agree more. I very much doubt this person is an accountant at all, more likely a book keeper.

OP - you need a chartered accountant, not least to make sure your tax affairs with HMRC are being dealt with properly. Which includes you being clear exactly how to deal with this loan from your mother. What you do not want or need is HMRC opening an investigation when you file your accounts because there's some irregularity about how you've handled this loan. Not having a proper accountant is a false economy.

Farrella

Apparently any tax advice needs to come from a tax advisor of his firm. I suspect our accountant doesn't want to be liable for any bad advice which is why he won't give any? Or is his firm just trying to make more money. Frustrating as we already pay his firm £2000 to £3000 a year.

It seems to me that there is zero chance I can use any money from company to payback the house buying loan, but there's more grey area for the loan for my company. Essentially the loans went straight from my bank account to my LTD company's account, either because we hadn't set up a company bank account or because it was more convenient for my mum to transfer to me first. I didn't have an accountant back then so it wasn't very organised. But the intention of those loans were specifically for the company. The exact amount of the loans went straight from my account to the company account, so there is good evidence.

Perhaps the company should pay back her loan directly, which would be more tax efficient than paying her via me.

Jenniefour

Farrella wrote: »

Apparently any tax advice needs to come from a tax advisor of his firm.

Whose firm? Is it the firm your accountant/book keeper belongs to?

I suspect our accountant doesn't want to be liable for any bad advice which is why he won't give any? If he is a chartered accountant, you need to be absolutely sure of this. No book keeper, quite rightly, would be giving any tax advice. And accountants do not normally do book keeping, they deal with tax returns etc. And they do advise about tax, it's their job. I think that you may have a contract which excludes giving advice. And getting it will cost extra.

Or is his firm just trying to make more money. Frustrating as we already pay his firm £2000 to £3000 a year.

This appears to be one of those companies who do some important admin for small businesses. Is that right? I really can't understand why you and your partner do not simply employ an independent chartered accountant who specialises in small companies and self employed. Accountants (unless they're on the payroll of a big company) would not normally be doing accounts, they receive the properly checked and accurate accounts, do some random checks, and deal with HMRC, e.g. determine you tax liability, file the returns.



It seems to me that there is zero chance I can use any money from company to payback the house buying loan, but there's more grey area for the loan for investing in my company. Essentially the money was passing my bank account to go to my LTD company's account, either because we hadn't set up a company bank account or because it was more convenient for my mum to transfer to me first. I didn't have an accountant back then so it wasn't very organised. But the intention of those loans were specifically for the company. The exact amount of the loans went straight from my account to the company account, so there is good evidence.

Perhaps the company should pay back her loan directly, which would be more tax efficient than paying her via me. You need proper advice on that from an accountant before you do anything at all with any company money concerning the loan. Better not to inadvertantly create a messier business situation until you and your partner are clearer about these matters.

There is a lot of confusing stuff in here. At the very least look at the contract you have with the person who you think is an accountant, and see what it says. What service exactly is being provided. I suspect it's book keeping only, or book keeping and issuing correct invoices on time, or similar. Who files the tax return for the LTD company and your annual return for Companies House? I do hope you're not paying an accountant fees to do your books - because that will be expensive. Rather than do them yourself, or hire a good book keeper (with informed oversight from you and your business partner to prevent fraud).

No offence, OP, but it sounds as though you and your business partner are not very clued up about how to deal with the financial/accounting/tax side of your business. That isn't necessarily a problem if you have the right people doing the right jobs for you but I'm not sure you do. And you're paying out a lot of money. An independent chartered accountant would not only give you proper advice re tax etc. but they might be able to unravel all this for you and get everything on a proper sound footing.And help you be clearer about how to keep business money and personal money completely separate.

First thing here is check that contract pronto. Find out exactly what it is you're paying for and how long you're tied into the contract. It sounds possible that you have signed up with a big firm who offer different levels of service and would probably be a firm used by a bigger business which is not quite big enough to justify employing their own accountant full time on their own payroll.

Farrella

Yes it is a big accountancy firm.

This is what the invoice says:

Preparation of the report and financial statements for the period ended 31 March 2013 together with abbreviated accounts for filing at Companies House including all associated calls and emails necessary to resolve queries.

Corporation tax compliance services for the period ended 31 March 2013 including preparation of the company tax return and computation and all further costs analyses required etc.

Pay around £2000 for this every year.

Jenniefour

Farrella wrote: »

Yes it is a big accountancy firm.

This is what the invoice says:

Preparation of the report and financial statements for the period ended 31 March 2013 together with abbreviated accounts for filing at Companies House including all associated calls and emails necessary to resolve queries.

Corporation tax compliance services for the period ended 31 March 2013 including preparation of the company tax return and computation and all further costs analyses required etc.

Pay around £2000 for this every year.

OK. That's clear about the service being provided and advice will cost you extra. Your choice is get the extra advice from them and pay for it. Your turnover may well be quite substantial, your business can afford it (and offset against your tax bill) and you're happy with the service you're getting. Yes, it will be an extra cost but better to get the properly qualified advice to avoid creating a problem with dealing with this loan, and to get some general advice about how to deal with future loans etc.

Looks likely you're getting a very professional service. Something to consider is whether your business, including present turnover (hopefully growing) warrants hiring the services of a big accountancy firm. You may decide it does, that's fine. Another option you have is to find an independent chartered accountant who deals specifically with small businesses and the self employed. The reason I say that is because I hired a big firm accountant when I first became self employed over 30 years ago. My first year's turnover was 7k, and the fees for filing my accounts with HMRC were, from memory, about £500. A friend, rightly, questioned why I was using that accountant. I found another - fees were half. And he often gave me advice. There was nothing amiss at all with my first accountant, he was very good and he did spend two hours with me explaining how to do book keeping meticulously, cross balance etc. Which I do to this day, great lesson. But I didn't have the experience to know I didn't need a big firm accountant. So maybe review that, perhaps with friends who run similar businesses - and you may decide to stay with the current firm and pay them to provide advice as well. Ask them if they can give you a fee for a one off consultation about how to deal with the loan.