Directors loan to ltd-reduce gross profit

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    Directors loan to ltd-reduce gross profit

    Hi Guys,

    i was wondering whether you could help me with this one. Our ltd is purchasing a flat to rent it out. We (private persons) are lending the whole amount for the purchase to the company as a directors loan, interest free. Can the company then pay it back and can this payment from company to private account be used to reduce gross profit? Will this loan repayment be considered as an expense to the company?

    Thank you for your help.

    #2
    The loan repayment is an expense, offset by the equity increase on the balance sheet (which isn't part of the P&L accounting).
    When I post, I am expressing an opinion - feel free to disagree, I have been wrong before.
    Please don't act on my suggestions without checking with a grown-up (ideally some kind of expert).

    Comment


      #3
      Company profit = Rental income (RI) - property repairs ( Rep) - allowable loan interest ( Nil) = ( RI- Rep) taxed at 19%.

      Company after tax profit = ( RI -Rep )* 0.81 which is repaid to directors to reduce outstanding loan .


      Where have you found "loan repayment" is an expense allowable against "rental income" ?

      Comment

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