Is it a loan????

[janesco]

Hi Guys

Now here is a question that could have an interesting answer.

I have an LAQC that allows me to reduce the amount of tax I pay

So I have applied for and put in place the IR23bs thingame with the wonderful people at the IRD. Cool.

My employer very nicely puts the tax difference into the LAQC accounts. Again Cool.

Now the question.... Is this, or can this be, considered a loan to the LAQC by me or do the IRD (did I tell you they are wonderful people ) consider this a capital injection? Can I then have the company repay the loan when it suits???

YOur thoughts please.....

[CJ]

I guess that is one good way to make sure the tax you save doesn't go on clothing etc.

If you put money in and it is not for the issue of shares, it is more likely to be a loan. Have it repayable with interest if demanded. therefore if you ever need money out, you have a current account from which you can draw. Can even raise a mortgage to repay your loan and the interest should be deductible.

[janesco]

Thanks for replying CJ.

I thought there might be a bit more discussion on this subject. Thus the late reply.

Either you are right on the button or nobody else has a clue... I know that can't be the case so you must have told me what I need to know.

I like the part about charging interest as well

[cube]

Everyone is out enjoying the sunshine!

A cash injection doesn't have to be in return for shares - it can just be Money Invested in the company, balanced by Money Withdrawn when you take some out.

Wouldn't a loan have to be documented carefully to be valid? It would be quite an effort to draw up a new loan doc each month!

cube

[CJ]

There is no sun in London so I guess thats why only I replied.

it can just be Money Invested in the company, balanced by Money Withdrawn when you take some out.

This sounds like a loan. A current account/shareholders accont (whatever you call it) is essentially a loan. Every time you take money out of a bank overdraft, you dont run into the bank to draw up a new contract. it isn't secured like a mortgage so no need for large formalitiesm, just a simple agreement that you will supply money from time to time and they will pay interest if demanded by you.

Since it is unsecured, you can charge a bit more interest to. No net effect as your income is offset by increased losses but builds up current account so easier to get money out of LAQC.

[Gerrard]

Don't forget that most of a tax refund probably comes courtesy of depreciation. So in fact it is a loan from the govt. In most cases there will be depreciation recovered when you sell the property.

Gerrard