The following Owner-Managed Businesses guidance note Produced by Tolley provides comprehensive and up to date tax information covering:
One of the most pressing issues for most types of business is the raising of sufficient finance to commence, continue or expand activities. However this is done, the business ought to consider the tax implications of the various options. In addition, there are specific tax reliefs which investors may actively seek or encourage a business to adopt. Examples of such tax efficient regimes include the enterprise investment scheme (EIS), the seed enterprise investment scheme (SEIS), or venture capital trust (VCT) scheme.
Tax advice at an early stage can maximise the effect of existing investment as well as encourage external investors.
Most businesses will have to take out a loan of some sort and the tax implications will differ depending on the terms of the loan and who it is from.
For companies, the taxation of loan interest is under the loan relationships regime, see the Corporate debt ― overview guidance note. Generally, interest on bank loans and overdrafts is allowable when it is accrued in the accounts.
If a company has a loan from an entity other than a bank, then this treatment may not apply. For example, a shareholder may loan his own money to the company. If a company pays interest on this loan, or other types of loans to individuals, then the ‘late paid interest’ rules may apply. This means that if the interest on the loan is accrued but not paid over for more than 12 months after the year end, then it is allowable when paid rather than when it is accrued.
In addition, there may be an obligation to withhold tax at source. If this is the case, then the company will have to report and pay this tax on a quarterly basis to HMRC using form CT61. This can be ordered online at request form CT61. Form CT61 notes are available on the HMRC website and further details can be found in the Withholding tax on payments of interest guidance note.
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