paying back money borrowed from my savings

cjmc11

Hi everyone
Last year I borrowed 10,000 euro from my savings to set up a business bank account.
Now that the business is bringing in money, I would like to start paying back this borrowed money to my personal account, preferably as quickly as possible.
My question is, if I for example, wanted to pay back 2000 euro this year, can this be put down as an expense for the business for tax purposes?,i.e. I write a cheque for 2k to myself from my business account to my personal account.
It's not like i will be trying to hide money anyways, because its plain to be seen when and where i borrowed the 10k from to set up the business account.
Appreciate any info
Thanks

Avatar MIA

cjmc11 wrote: »

Hi everyone
Last year I borrowed 10,000 euro from my savings to set up a business bank account.
Now that the business is bringing in money, I would like to start paying back this borrowed money to my personal account, preferably as quickly as possible.
My question is, if I for example, wanted to pay back 2000 euro this year, can this be put down as an expense for the business for tax purposes?,i.e. I write a cheque for 2k to myself from my business account to my personal account.
It's not like i will be trying to hide money anyways, because its plain to be seen when and where i borrowed the 10k from to set up the business account.
Appreciate any info
Thanks

No. And you can't claim interest either as it was from savings.

Graham

OP you really need to go an talk to an accountant.

xabi

I did something similar, my accountant told me to write a cheque to myself for the amount that I loaned to the company. Here's a thread from AAM with a similar request.

http://www.askaboutmoney.com/threads/director-giving-a-loan-to-his-company.151952/

Avatar MIA

xabi wrote: »

I did something similar, my accountant told me to write a cheque to myself for the amount that I loaned to the company.

The OP doesn't mention a company.

Secondly, the only benefit of writing a cheque to the company is that you are funding the company and it will be accounted for in the Director's current account. It should not be expensed.

If that's what the accountant suggested, get another accountant.

xabi

Avatar MIA wrote: »

The OP doesn't mention a company.

Secondly, the only benefit of writing a cheque to the company is that you are funding the company and it will be accounted for in the Director's current account. It should not be expensed.

If that's what the accountant suggested, get another accountant.

My situation was identical to that on the AAM thread, are you saying that advice is wrong?

Avatar MIA

xabi wrote: »

My situation was identical to that on the AAM thread, are you saying that advice is wrong?

What specific advice are you relying on from the AAM thread?

xabi

Avatar MIA wrote: »

What specific advice are you relying on from the AAM thread?

I personally loaned my company 10K, 6 months later I wrote a cheque for 10K to myself from the company to payback the loan. Is that not how it should be done?

cjmc11

Graham wrote: »

OP you really need to go an talk to an accountant.

Yup will do, just said I'd post here just out of interest.

Avatar MIA

xabi wrote: »

I personally loaned my company 10K, 6 months later I wrote a cheque for 10K to myself from the company to payback the loan. Is that not how it should be done?

That's fine. You're just taking back your own money.

Whereas, the impression I'm getting from the OP is that he wants to expense what he loaned.

Avatar MIA

cjmc11 wrote: »

Yup will do, just said I'd post here just out of interest.

What doubts remain after reading the above?

Signed
An Accountant

cjmc11

xabi wrote: »

I personally loaned my company 10K, 6 months later I wrote a cheque for 10K to myself from the company to payback the loan. Is that not how it should be done?

Xabi, could you put that 10k cheque down as a legitimate expense on the company's books?
That's kind of where I'm coming from with this thread.

Avatar MIA

cjmc11 wrote: »

Xabi, could you put that 10k cheque down as a legitimate expense on the company's books?
That's kind of where I'm coming from with this thread.

Think about it this way.

You make €20k profit in a business. You "loaned" yourself €20k to start up your business. You pay yourself back the €20k you loaned and consider treating this as an expense to clear the profit you earned.

Do you think revenue are going to allow you to do that?

xabi

cjmc11 wrote: »

Xabi, could you put that 10k cheque down as a legitimate expense on the company's books?
That's kind of where I'm coming from with this thread.

Its just listed as the company paying back the loan i gave it. Do you have a company?

xabi

Avatar MIA wrote: »

Think about it this way.

You make €20k profit in a business. You "loaned" yourself €20k to start up your business. You pay yourself back the €20k you loaned and consider treating this as an expense to clear the profit you earned.

Do you think revenue are going to allow you to do that?

I'm confused or missing the point, but if I loan the company money and then take it back, am I not just taking back my money? What exactly does expense the loan in this case mean?

Avatar MIA

xabi wrote: »

I'm confused or missing the point, but if I loan the company money and then take it back, am I not just taking back my money? What exactly does expense the loan in this case mean?

That post was for the OP, and there is no expense allowed in this case.


What you are doing is fine. You loaned money to the company and taking it back. There is no tax implications in this scenario - good or bad.

Graham

Avatar MIA wrote: »

That post was for the OP, and there is no expense allowed in this case.


What you are doing is fine. You loaned money to the company and taking it back. There is no tax implications in this scenario - good or bad.

Isn't that exactly what the OP did.

Put €10k into the business at the start, now wants to take it back out.

Avatar MIA

Graham wrote: »

Isn't that exactly what the OP did.

Put €10k into the business at the start, now wants to take it back out.

Yes, but if you read his OP he's wondering if he can treat that payment as a business expense. He cannot.

Graham

Avatar MIA wrote: »

Yes, but if you read his OP he's wondering if he can treat that payment as a business expense. He cannot.

What it's labelled as in the books is probably less relevant than what he was trying to achieve; taking some of the money back out without any tax implications.

Avatar MIA

Graham wrote: »

What it's labelled as in the books is probably less relevant than what he was trying to achieve; taking some of the money back out without any tax implications.

I think he wants there to be a (positive) tax implication

cjmc11 wrote: »

Xabi, could you put that 10k cheque down as a legitimate expense on the company's books?
That's kind of where I'm coming from with this thread.

cdeb

There's two issues here, and I think there's a bit of confusion as people are talking about separate issues and thinking they're the same.

Can the OP's company pay back to the OP what was loaned to the company? Yes he can. Would he have to pay Income Tax on this receipt? No he wouldn't.

But "expensing" in company's terms means an item allowed against Corporation Tax. So can the OP claim the loan repayment against his profits for CT purposes? No, he cannot.

The OP seems to be asking the latter question - in which case, Avatar MIA is correct.

Graham

Avatar MIA wrote: »

I think he wants there to be a (positive) tax implication

Not what I assumed from the OP but as neither of us took the time to ask we don't know.

cdeb wrote: »

The OP seems to be asking the latter question - in which case, Avatar MIA is correct.

I assumed the former.

It does rather emphasise the importance of sitting down with a qualified professional who has the time to ask what you're trying to do, why you're trying to do it and the background behind it.

Avatar MIA

Graham wrote: »

Not what I assumed from the OP but as neither of us took the time to ask we don't know.

Ask what? Does he know what he is asking and if he understands the terms that he is using?

Anyway, cdeb has fully answered it and I don't expect to hear back from the OP.

cdeb

Yeah, the first post is maybe a bit ambiguous alright, but later on, the OP says -

cjmc11 wrote: »

Xabi, could you put that 10k cheque down as a legitimate expense on the company's books?
That's kind of where I'm coming from with this thread.

- which is fairly clear to me. So no, you cannot.

It's entirely possible, of course, that the OP is just not using the right terminology - in which case, as suggested before, go through it with an accountant (showing them books and records) rather than trusting to potential confusion on the internet.

xabi

Say a company is 50K in profit and I loan it 10K one week and take it back the next, is CT calculated on the 50K or 60K, all other things being equal.

Avatar MIA

xabi wrote: »

Say a company is 50K in profit and I loan it 10K one week and take it back the next, is CT calculated on the 50K or 60K, all other things being equal.

CT would be payable on the €50k

cdeb

50k.

A loan coming in or going out isn't taxable as it's not income. (There are exceptions - if you "loan" yourself lots of money in lieu of salary, for example)

xabi

So is the suggestion that the OP wants to pay CT on 40K (if using my example)?

edit: I'm not saying that's the case for the OP, just using it as an example for my understanding.

cdeb

That's the way it reads alright, yep. Which isn't allowed.

sKeith

Checking if this is correct. I loan company 10k to start, it brings in 12k (2k profit) i dont want to pay back full loan, as i would have no working capital left. so i pay back 2k to myself. Profit is still 2k with 8k now being borrowed. 10k working capital will keep company afloat for another while. the 2k paid back does not come off my profits, it comes straight out of the working capital of the company.

cjmc11

Thanks everyone for the replies
The business that the money was loaned to is a small farm, part time, self employed, I work full time paye aswell.
Don't know does that make any difference or not.
Yes obviously I will be speaking to an accountant about this, just said I'd ask the question on here just out of curiosity more than anything, not much point in a taxation forum if ya don't ask questions.
p.s. AvatarMia while some of your posts have been helpful, your attitude leaves alot to be desired, how about just asking and answering the questions, some of us dont have time in the middle of the working day to answer straight away so leave smart arse comments like that out of it, thanks.

cdeb

sKeith wrote: »

Checking if this is correct. I loan company 10k to start, it brings in 12k (2k profit) i dont want to pay back full loan

If the company makes 12k profit, it makes 12k profit.

The 10k you loaned does not reduce the taxable profits.

If, however, you loan the company 10k and it now has 12k in cash (assuming no other assets/debts), then you have made 2k profit.

So either way, you do need to check with an accountant on this as I'm not sure you're using the phrasing correctly at all - which makes it impossible to give any practical advice over the internet unfortunately.

CIARAN_BOYLE

cjmc11 wrote: »

Thanks everyone for the replies
The business that the money was loaned to is a small farm, part time, self employed, I work full time paye aswell.
Don't know does that make any difference or not.
Yes obviously I will be speaking to an accountant about this, just said I'd ask the question on here just out of curiosity more than anything, not much point in a taxation forum if ya don't ask questions.
p.s. AvatarMia while some of your posts have been helpful, your attitude leaves alot to be desired, how about just asking and answering the questions, some of us dont have time in the middle of the working day to answer straight away so leave smart arse comments like that out of it, thanks.

Is the 'business' a company or a sole tradership?

Avatar MIA

cjmc11 wrote: »

Thanks everyone for the replies
The business that the money was loaned to is a small farm, part time, self employed, I work full time paye aswell.
Don't know does that make any difference or not.
Yes obviously I will be speaking to an accountant about this, just said I'd ask the question on here just out of curiosity more than anything, not much point in a taxation forum if ya don't ask questions.
p.s. AvatarMia while some of your posts have been helpful, your attitude leaves alot to be desired, how about just asking and answering the questions, some of us dont have time in the middle of the working day to answer straight away so leave smart arse comments like that out of it, thanks.

You're welcome.

cjmc11

CIARAN_BOYLE wrote: »

Is the 'business' a company or a sole tradership?

Sole trader, just myself working, investing and gaining from the business, small farm, part time (evenings and weekends), working full time PAYE as well.

CIARAN_BOYLE

cjmc11 wrote: »

Sole trader, just myself working, investing and gaining from the business, small farm, part time (evenings and weekends), working full time PAYE as well.

Then any transactions between you and the sole tradership by way of you introducing capital or drawing out capital have no effect on tax position of the trade.

There is no difference between you and 'the business'.

sKeith

thanks cdeb, i worded incorrectly. [I loan company 10k to start, it now has 12k (2k profit) i dont want to pay back full loan]
I think that correction should work for the rest of my example.

cjmc11

CIARAN_BOYLE wrote: »

Then any transactions between you and the sole tradership by way of you introducing capital or drawing out capital have no effect on tax position of the trade.

There is no difference between you and 'the business'.

Ah right, that clears that up. So it makes no odds if I leave it in the business account or repay it into my savings account for tax purposes.
Thanks

BnB

sKeith wrote: »

Checking if this is correct. I loan company 10k to start, it brings in 12k (2k profit) i dont want to pay back full loan, as i would have no working capital left. so i pay back 2k to myself. Profit is still 2k with 8k now being borrowed. 10k working capital will keep company afloat for another while. the 2k paid back does not come off my profits, it comes straight out of the working capital of the company.

Yes - I think you are correct.

If you Loan the company €10k it does not affect the Profit and Loss of the company in any way. It only affects the Balance Sheet.

i.e. - You loan the company €10k today. The money goes into the Company Account in the bank and on the books it gets entered as a liability in a Director's Loan Account or something like that.

So - The company's Balance Sheet now show's a liability of €10k in the Directors Loan Account because the company owes you personally €10k and an asset of €10k cash in the bank which cancel each other out.

If the company goes off and spends that entire €10k in the year and brings in €12k, then obviously the company has made a profit of €2k. So your profit and loss will show income of €12k, outgoings of €10k and a profit of €2k.

Whatever you decide to do now with regard to paying back the loan will:
a) Have no effect on the profit and Loss at all.
b) Will have an effect on the balance sheet, but the final Balance Sheet figure will stay the same.

So after your years trading, you Balance Sheet now shows an Asset of €12k Cash in the bank and a Liability of a directors loan for €10k. So the over all position is that the company is in the Black to the tune of €2k.

If you decide to pay the whole loan back - Your Director's loan goes to Zero - Cash goes to €2k - Company is in the Black to the tune of €2k.

If you decide to pay the €5k back - Your Director's loan goes to €5k - Cash goes to €7k - Company is in the Black to the tune of €2k.....

bmwguy

You loan the business money at the start. This is owners capital.

Accounting entry is

DR Bank 10k
CR Capital 10k

You now have an asset and a liability, 10k in the bank but an obligation to pay back the 10k to the provider of the capital

These are both balance sheet accounts which is nothing to do with your P&L

When you take the money back

CR Bank 10k
DR Capital 10k

Again, nowhere near the P&L

Books4you

cjmc11 wrote: »

Thanks everyone for the replies
The business that the money was loaned to is a small farm, part time, self employed, I work full time paye aswell.
Don't know does that make any difference or not.
Yes obviously I will be speaking to an accountant about this, just said I'd ask the question on here just out of curiosity more than anything, not much point in a taxation forum if ya don't ask questions.
p.s. AvatarMia while some of your posts have been helpful, your attitude leaves alot to be desired, how about just asking and answering the questions, some of us dont have time in the middle of the working day to answer straight away so leave smart arse comments like that out of it, thanks.

Honestly that's how you respond to help from AvatarMia. You asked, they answered and you didn't like the answer. Simple as that. Very childish.

Avatar MIA

Books4you wrote: »

Honestly that's how you respond to help from AvatarMia. You asked, they answered and you didn't like the answer. Simple as that. Very childish.

Thanks mum

cjmc11

Books4you wrote: »

Honestly that's how you respond to help from AvatarMia. You asked, they answered and you didn't like the answer. Simple as that. Very childish.

Goin off the topic but, ehhh, where did I not like the answer? Just asking a taxation question, hardly personal stuff, have no problem paying whatever tax I owe, just wanted to know could it be put down as an expense to reduce the tax I would have to pay, just like all businesses do, I don't think there's many businesses going out of their way to pay more tax than they need to.
I asked the question I got my answers, most were to the point, some, not so much.

cjmc11

And I did thank avatarmia, maybe have another look through the posts, don't be creating an argument for the sake of it, especially on a discussion about a bit if tax.

Axwell

cjmc11 wrote: »

p.s. AvatarMia while some of your posts have been helpful, your attitude leaves alot to be desired, how about just asking and answering the questions, some of us dont have time in the middle of the working day to answer straight away so leave smart arse comments like that out of it, thanks.

You aren't a mod so leave the moderation to those that are. If you have a problem with a post report it, otherwise keep on topic and don't go taking moderating into your own hands.

jimmii

Thread needs some Pedro! It's great to see an eb&m thread getting some action though. End of the day you can't loan yourself money as long as you are paying tax on the profits that's all that really matters.