Are there any tax rules affecting lending money from my limited company to my son’s limited company? The loan will be for about £30,000 and will be repayable whenever my son's limited company can afford to repay it (aiming for two years’ time). However, are there any tax implications on this if the loan is interest-free? I'm happy to charge interest at HMRC's approved rates if needed if it avoids any issues, but is there anything else I should consider before making the loan?
Arthur Weller replies:
Your company can lend money to your son's company, and there will be no ‘loans to participators’ tax charge (under CTA 2010, s 455) on your company (i.e. 32.5% corporation tax on the amount of the loan outstanding nine months after the accounting year-end). Whether your company charges interest or not will not make a difference to the section 455 charge.
This question was first printed in Business Tax Insider in March 2019.