Directors Loan to Company to be paid back to children

ihthelp

I have loaned my company money and in the loan agreement I have requested that the loan be paid back to my children.

I have two questions

1. From an IHT perspective is the Potentially Exempt Transfer date, the date that I loaned the company money or the date that the children will receive the money

2. Can the children receive the money tax free, as i would if the money was paid back to myself as director.

Any help is appreciated.

rhysadams

I may be wrong here, but I don't think this is possible.


I think you need to take the money back yourself and then transfer it to your children, being careful with any tax issues.

00ec25

perfectly possible, it is in principle no different to any other gift from parent to child

the loan repayment to the children will be a PET from the date it is paid to the child since that is the date it left the parent's estate in the sense the DLA is obviously part of the parent's overall net worth.

the children will not incur income tax on the money they receive as it is what it is, a cash gift from their parents

of course if the children are not yet adults and the money is paid into a savings account, the parents would be liable for tax on the interest earned on such savings (subject to the £100 threshold).
if the children are adults and are this responsible for their own financial affairs then such interest is their own taxable income, but the lump sum they get is not taxable


the above assumes that the company is not charged interest on the DLA by the director