Intercompany loans

groundy

I have a client that has a substantial amount of cash within the business and is looking to purchase properties. We would rather keep the properties seperate to the main business but if the cash is drawn then the shareholder/director will have severe personal tax implications.

Therefore, I was thinking of setting up a company for buying properties which would then borrow money off the trading company for deposits. I am aware this will make the second company an Investment company and I am aware of the need to use higher CT% and the payment of dividends not being possible.

However, I wondered if there is anything I am missing???

I know S419 would apply if a loan was made to a director or relative but does it apply if money loaned from one company to another were they are associated? I have never treated it as such but intercompany loans have normally been for small amounts and the figures involved here will certainly run into 6 figures.

Thanks for any advice

jamesm96

I don't see a problem, it's just one company making a loan to another; perfectly common. It's a related party transaction I suppose so there's technically a disclosure requirement, but nothing more than that.