Second opinion needed please! Loans, rent etc

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GinnyBee
GinnyBee Registered, Tutor Posts: 131 Dedicated contributor 🦉
in General accounting discussion
I'd like to ask for a second opinion on the situation regarding a client of mine. I think I know what I need to tell him but feel the need to have a little extra input! If anyone knows the correct course of action I would be very grateful of your input!

He is going to loan money to people who are property investors as short term loans for higher than bank rate interest. This is, he believes, a business activity so he want's to loan his business the money (from his personal capital) then the business loan out the money for the loans.

Is he allowed to do this?

Will he end up getting taxed in more than one place?

Any other points?

Please note I have deliberately left out my opinion here - I need others opinions please!

Thank you :001_smile:

Gin

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  • ExcelAnt
    ExcelAnt Registered Posts: 80 Epic contributor 🐘
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    Surely he'd need all kinds of financial services regulations to adhere to?
  • Fingersan
    Fingersan Registered Posts: 84 Regular contributor ⭐
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    Hi Ginny

    As ExcelAnt says, it is woth checking out FSA regs. As for the tax, if his 'business' is a Ltd Co, then the interest received by the company should be received gross. He would then have to deduct 20% tax when he repays interest to himself (the individual) and complete a CT61 to pay HMRC the tax on a (I think) quarterly basis.

    If he is not a Ltd Co, then he is the business and would have tax deducted on the interest that he receives from the people he lends to and so no further tax should be deducted.

    I hope this helps, but please check FSA regs. May be worth a call to the FSA. :001_smile:

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