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

robber2

Presumably these 'start up loans' have been recorded in the company books and are shown in the Company year end accounts ? If so its a simple process for the Company to repay the loan to the lender (you) and record the transaction in the company books. You can then settle direct with your mum.

Your role as a shareholder plays no part in this transaction.

As a general comment if the Company wants to give you money there are only really two options; 1; The Company makes a dividend payment to you as shareholder. or 2; the Company takes you on as an employee / director and pays you a salary.

Rob

BrassicWoman

3. you sell some of your shares to another director? (director give you money not the company)
4. the company gives you a loan (which you may/must repay at some date)

robber2

Hi Brassic,

I tried to limit the options for the OP to the simplest so didn't mention 3 or 4. Nor did I suggest option 5; Directors Pension contributions by the Company.

Rob

Farrella

Yes the books shows exactly how much was loaned to the company from my Mum via me. I guess I was trying to work out if the company transfer money to my account and then my Mum's account, whether I would have to pay tax. It might be better to just transfer direct from company to my Mum. Thanks for all the advice.

BrassicWoman

So hold on.


The books show a loan *from you* to the company?


Is it marked down as a loan in the books, as opposed to it being eg an investment in share capital?

Farrella

Yes they all say they are "Loans" from me. Even though the money is from my Mum.

Some of the money did actually go direct from my Mum's account to the company account, but most went via my account.

I have loan contracts with my Mum which say she is loaning money for the company. This was all done a few years ago, we were not very organised...

robber2

Okay, as you have records of the loans that were made and to keep things simple , avoid any HMRC issues and keep your bookeeper and accountant happy simply do this;

1. For the loans direct from your mum to the Company, total them up and make a direct payment from the company to the bank account of your mums choice (or write a compnay cheque). It would be good practise to ask your mum to confirm (in writing) reciept of the payment and also state that this represents payment in full of the loans she made to the company in 20xx

2. For the loans that came from your mum via you to the company, total them up and make a direct payment from the company to the bank account of your choice. It would be good practise for you to confirm (in writing) reciept of the payment and also state that this represents payment in full of the loans you made to the company in 20xx.
Once this money is in your bank you simply transfer this amount to your mums account.

By the way congratulations on getting the business running successfully to the point where the loans can be repaid. Its not always the case.

regards

Rob