Call for Assistance: 02033 259 341
Spondoo Accounting
Call for Assistance: 02033 259 341
Spondoo Accounting

Can my limited company loan money to another limited company owned by me or a family member?

May 29, 2023

In short, the answer is yes.

Yes, your limited company can indeed loan money to another limited company owned by you or a family member.

From a legal standpoint, the director of the lending company must ensure that the business has sufficient funds to provide the loan without jeopardizing its own financial stability.

From a tax perspective, it is necessary to establish a loan agreement between the two businesses, ensuring that the interest charged reflects a fair and arm’s length lending transaction. The lending company will be required to pay corporation tax on any interest payments received, while the receiving company can claim tax relief on the interest payments made towards servicing the loan.

It is crucial to ensure that the loan is used by the receiving company for legitimate trading purposes and not for personal payments to you or your family members as directors or shareholders of the receiving company. This is to avoid being subject to the ‘s455’ anti-avoidance rules as failure to comply may result in the imposition of a director’s loan charge on the payment.

More information on reclaiming the https://www.spondoo.co.uk/tips/reclaiming-section-455-director-loan-charge-by-post-and-even-as-an-agent/ section 455 director’s loan charge can be found on this link.

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Information provided on the site is merely guidance that may change in line with UK law and regulations. Users must not consider this to be financial advice or their sole resource when making any financial decision. Spondoo is a trading name for Accounting SQL Limited, authorised & license accounting firm under the Institute of Financial Accountants.
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