Loans from Family

[gerard.jude]

Hello,

I've borrowed cash from my family in order to bootstrap my business.
They have taken loans and maxxed out their credit-cards in order to
fund me.

I owe four family members £5K each, I'm in a position to pay this back
now and I was wondering the correct way to do this (from a tax point of
view).

Can I simply show the initial loans on my books and write them a cheque
for £5K each?

Thanks in advance for any help

-- G

 

[Peter Saxton]

Hello,

I've borrowed cash from my family in order to bootstrap my business.
They have taken loans and maxxed out their credit-cards in order to
fund me.

I owe four family members £5K each, I'm in a position to pay this back
now and I was wondering the correct way to do this (from a tax point of
view).

Can I simply show the initial loans on my books and write them a cheque
for £5K each?

Thanks in advance for any help

-- G

Yes

 

[Doug Ramage]

Hello,

I've borrowed cash from my family in order to bootstrap my business.
They have taken loans and maxxed out their credit-cards in order to
fund me.

I owe four family members £5K each, I'm in a position to pay this back
now and I was wondering the correct way to do this (from a tax point of
view).

Can I simply show the initial loans on my books and write them a cheque
for £5K each?

Thanks in advance for any help

-- G

Limited company or sole trader.

Were the loans interest free or not?

 

[gerard.jude]

Excellent, the loans were given to me before the company was limited,
(only a few months before) does this matter? Is there any tax involved
here? Should I draft some sort of loan form from them to the limited
company to attach to the companies records/books?

 

[gerard.jude]

The loans were interest free, but I could pay interest on them if this
would help ;-)
The loans were given to me to investigate the business and also used to
set up the limited company (eventually).

 

[Doug Ramage]

The loans were interest free, but I could pay interest on them if this
would help ;-)
The loans were given to me to investigate the business and also used to
set up the limited company (eventually).

Although the interest paid may be tax deductible for you/company, it would
be taxable on the recipient (assuming he/she pays tax).

 

[Doug Ramage]

Excellent, the loans were given to me before the company was limited,
(only a few months before) does this matter? Is there any tax involved
here? Should I draft some sort of loan form from them to the limited
company to attach to the companies records/books?

Did you pay the loan monies into the business bank account?

 

[gerard.jude]

No, I didn't have a business bank account then.

 

[Ronald Raygun]

Although the interest paid may be tax deductible for you/company, it would
be taxable on the recipient (assuming he/she pays tax).

Not necessarily, that is to say not unless they are making a profit
from their "money lending business". He said "They have taken loans
and maxxed out their credit-cards in order to fund me.", so any interest
he pays to them, will be taxable on them only to the extent that it
exceeds what they in turn are paying their lenders (in respect of the
sum involved).

 

[Peter Saxton]

Excellent, the loans were given to me before the company was limited,
(only a few months before) does this matter? Is there any tax involved
here? Should I draft some sort of loan form from them to the limited
company to attach to the companies records/books?

It doesnt really matter. No tax effect on these loans unless there's
interest involved.