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Q: My family are considering lending me £20,000 to boost my small electrical business. Will I need to pay tax on this interest free loan and can I make repayments from my business bank account?

Feb 26 2008

Answered by: Clive Lewis Ask a question

You do not mention what the status of your business is – sole trader or limited company. Assuming the business is a sole trader the loan can be shown in the accounts as a debt. There is no tax liability arising from receiving this loan. Repayments should be made from your business bank account.

You should have an agreement in writing which could be produced to HMRC if necessary. The parties to the loan, the amount of the loan and the period over which it is scheduled to be repaid, details of any security together with any other terms should be detailed. If should be signed and dated.

Comments [1]

Comment by Jack Wratten

Wednesday 27th February 2008

And what would the situation be if the loan was to a limited company?

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