Can anyone help? I get paid through Loan Repayments and dividends and I need a mortgage

maxxx2110

I wander if anyone can help.
I co own a couple of small restaurants in London. When we set the first one up over 10 years ago, our accountant suggested we should pay ourselves through a combination of Loan Repayments and dividends. I did not think much of it and said it was fine.
I recently spoke to a mortgage advisor and he told me that lenders do not see Loan Repayments as a form of income and simply do not qualify in order to get a mortgage. Only dividends apparently do so the amount I can get is lower then expected.
I am gutted as I had already found a flat and I was under the impression that I could easily borrow the money as my credit check went though fine.
Any advice? (Crossing fingers)
Max

normanna

You have been avoiding tax by doing this I would presume.  You might owe the tax man a fair amount but I am no tax expert.  I would do some checking into the potential repercussions of what you have been doing so I suggest you get this sorted first before looking into getting a mortgage.

Thrugelmir

normanna said:

You have been avoiding tax by doing this I would presume.  You might owe the tax man a fair amount but I am no tax expert.  I would do some checking into the potential repercussions of what you have been doing so I suggest you get this sorted first before looking into getting a mortgage.

If money was lent to the business to set it up. Then perfectly above board. 

[Deleted User]

normanna said:

You have been avoiding tax by doing this I would presume.  You might owe the tax man a fair amount but I am no tax expert.  I would do some checking into the potential repercussions of what you have been doing so I suggest you get this sorted first before looking into getting a mortgage.

Got it one, you’re no tax expert. You’re not even proficient in tax if you think tax avoidance will have serious repercussions for the OP with HMRC.  If you really want to blow your mind head to the Cutting Tax board. 

unforeseen

Can you evidence all this money that you have been paid as a loan repayment ever going into the company from your personal account?
If not then it is quite simply a tax avoidance scheme.

I wonder what the creative accounting looks like. How much have you loaned to the company and how have you got back as a repayment? I bet there is a HUGE difference in the 2 figures

maxxx2110

unforeseen said:

Can you evidence all this money that you have been paid as a loan repayment ever going into the company from your personal account?
If not then it is quite simply a tax avoidance scheme.

I wonder what the creative accounting looks like. How much have you loaned to the company and how have you got back as a repayment? I bet there is a HUGE difference in the 2 figures

Absolutely, 100% of the money being paid as a loan repayment was originally coming from my personal account. I never asked for a loan in order to open, it was all mine and my family's money.
Please do not assume that I am a tax dodger, our accounts are crystal clear.

maxxx2110

Thrugelmir said:

normanna said:

You have been avoiding tax by doing this I would presume.  You might owe the tax man a fair amount but I am no tax expert.  I would do some checking into the potential repercussions of what you have been doing so I suggest you get this sorted first before looking into getting a mortgage.

If money was lent to the business to set it up. Then perfectly above board. 

Thrugelmir said:

normanna said:

You have been avoiding tax by doing this I would presume.  You might owe the tax man a fair amount but I am no tax expert.  I would do some checking into the potential repercussions of what you have been doing so I suggest you get this sorted first before looking into getting a mortgage.

If money was lent to the business to set it up. Then perfectly above board. 

That is exactly the case. All personal money lent to set up first the first restaurant and then 4 years later the second one.

Cscott139

There is nothing dodgy about what you have done and is completely above board. Lenders, though, will not class this as an income as strictly speaking it isn't, its a repayment of a loan. There are lenders that look at your share of net profit instead of dividends so this could work out better for you.

maxxx2110

Cscott139 said:

There is nothing dodgy about what you have done and is completely above board. Lenders, though, will not class this as an income as strictly speaking it isn't, its a repayment of a loan. There are lenders that look at your share of net profit instead of dividends so this could work out better for you.

Thank you, I did not know this. I will definitely look into it.

Sistergold

Repayment of money lent to the business is not a salary/income. If you have been saving this money(loan repayments) you can use that as deposit and proof of where funds came from. You just need to get to a point where your business is now paying you enough to get enough income for the amount you need to borrow. 

dunstonh

As stated, it is not dodgy.   However, it is a tax efficient means to draw money.  You can charge the business interest for example which reduces your profit and corporation tax. It effectively increases the amount you can take out of the business by reducing taxation.    But, it comes with consequences as it is not a means of income that lenders consider (as it is not income but return of capital).    That said, some lenders will take retained profit into account as well as dividends.  Does the business have any retained profit and is the trend on retained profit improving or getting worse?

out of interest, are you not even taken a salary to the primary threshold?  If you dont do that then you will not qualify for a state pension in those years.