Q: I am buying a freehold café, but can’t get business finance so I’m remortgaging my home. Should I set up a small company and loan the money to it? And can I lease the equipment I buy to the company and then claim it back in tax?
Nov 30 2008
Answered by: Clive Lewis Ask a question
Provided the amount you put into the café broadly equates to the amount of the additional mortgage, it should be easy to demonstrate to HM Revenue & Customs the source of the money invested in the café. If you decide to set up a limited company and invest the money raised in it, this will protect you from the café’s creditors should the venture fail as a business. Although you will have invested what sounds like a large sum of money so you will probably be the biggest creditor.
As far as the tax position is concerned, the loan from you will attract interest, which should at least be the cost of the additional mortgage on your home. The interest charged to the café business will count as a valid expense against the café’s profits for tax purposes.
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