Hi All,

I have a  limited company and I'm thinking about setting up another
one which would be doing something completely different. The new
company requires some initial capital which I would like to transfer
from my existing company. What's the best approach from the tax point
of view?

a) do I need to take a dividend and pay tax on it, not being able to
claim that amount of money as an expense and then put my personal
money to another company as a director's loan?

OR

b) is there a better option? Ideally I would like to put money from
company A to company B and being able to claim that amount of money as
expense for company A

Please note, I'm 100% shareholder in company A, but I won't be in
company B

Thanks a lot for advice,
Richard

On 10 Aug, 20:08, Richard  wrote:
> Hi All,
>
> I have a  limited company and I'm thinking about setting up another
> one which would be doing something completely different. The new
> company requires some initial capital which I would like to transfer
> from my existing company. What's the best approach from the tax point
> of view?
>
> a) do I need to take a dividend and pay tax on it, not being able to
> claim that amount of money as an expense and then put my personal
> money to another company as a director's loan?
>
> OR
>
> b) is there a better option? Ideally I would like to put money from
> company A to company B and being able to claim that amount of money as
> expense for company A
>
> Please note, I'm 100% shareholder in company A, but I won't be in
> company B
>
> Thanks a lot for advice,
> Richard

How is the money that company A lends to company B an expense for
company A?

PeterSaxton wrote:

> On 10 Aug, 20:08, Richard  wrote:
>>
>> I have a  limited company and I'm thinking about setting up another
>> one which would be doing something completely different. The new
>> company requires some initial capital which I would like to transfer
>> from my existing company. What's the best approach from the tax point
>> of view?
>>
>> a) do I need to take a dividend and pay tax on it, not being able to
>> claim that amount of money as an expense and then put my personal
>> money to another company as a director's loan?
>>
>> OR
>>
>> b) is there a better option? Ideally I would like to put money from
>> company A to company B and being able to claim that amount of money as
>> expense for company A
>>
>> Please note, I'm 100% shareholder in company A, but I won't be in
>> company B
> 
> How is the money that company A lends to company B an expense for
> company A?

If company B goes belly up and cannot repay the loan, then company A
would need to write it off as bad debt.  That would be an expense,
wouldn't it?

But certainly if A lends money to B (or alternatively if A buys
shares in B), this money would remain on A's balance sheet as
an asset.  I imagine it would be necessary first to ensure that
A's M&A are phrased in sufficiently wide terms so as to permit
that kind of business.

On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> PeterSaxton wrote:
> > On 10 Aug, 20:08, Richard  wrote:
>
> >> I have a  limited company and I'm thinking about setting up another
> >> one which would be doing something completely different. The new
> >> company requires some initial capital which I would like to transfer
> >> from my existing company. What's the best approach from the tax point
> >> of view?
>
> >> a) do I need to take a dividend and pay tax on it, not being able to
> >> claim that amount of money as an expense and then put my personal
> >> money to another company as a director's loan?
>
> >> OR
>
> >> b) is there a better option? Ideally I would like to put money from
> >> company A to company B and being able to claim that amount of money as
> >> expense for company A
>
> >> Please note, I'm 100% shareholder in company A, but I won't be in
> >> company B
>
> > How is the money that company A lends to company B an expense for
> > company A?
>
> If company B goes belly up and cannot repay the loan, then company A
> would need to write it off as bad debt.  That would be an expense,
> wouldn't it?
>
Which of the possible future events should be used in the accounts?
Company B may pay out a lot in dividends. Should you treat that as
profits before it happens too?

Returning to sense, the money spent is an investment not an expense.
It should appear on the balance sheet as an asset.

PeterSaxton wrote:

> On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> PeterSaxton wrote:
>>
>> > How is the money that company A lends to company B an expense for
>> > company A?
>>
>> If company B goes belly up and cannot repay the loan, then company A
>> would need to write it off as bad debt.  That would be an expense,
>> wouldn't it?
> 
> Which of the possible future events should be used in the accounts?
> Company B may pay out a lot in dividends. Should you treat that as
> profits before it happens too?

What are you on about?  Who said anything about future events?  I simply
answered your question of how (i.e. in what circumstances) a loan can
become an expense.  Naturally it goes without saying that this cannot
be done until the circumstances have arisen.

> Returning to sense, the money spent is an investment not an expense.
> It should appear on the balance sheet as an asset.

Which is what I said, didn't I?

> PeterSaxton wrote:
>>
>> <SNIP>
>
"Ronald Raygun" wrote
> Which is what I said, didn't I?

Yep.  Peter doesn't like reading what people actually
say, he prefers to just assume that they are wrong...

On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> PeterSaxton wrote:
> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> >> PeterSaxton wrote:
>
> >> > How is the money that company A lends to company B an expense for
> >> > company A?
>
> >> If company B goes belly up and cannot repay the loan, then company A
> >> would need to write it off as bad debt.  That would be an expense,
> >> wouldn't it?
>
> > Which of the possible future events should be used in the accounts?
> > Company B may pay out a lot in dividends. Should you treat that as
> > profits before it happens too?
>
> What are you on about?  Who said anything about future events?  I simply
> answered your question of how (i.e. in what circumstances) a loan can
> become an expense.  Naturally it goes without saying that this cannot
> be done until the circumstances have arisen.
>
> > Returning to sense, the money spent is an investment not an expense.
> > It should appear on the balance sheet as an asset.
>
> Which is what I said, didn't I?

So, you admit that in the circumstances as outlined by the OP the
payment should not be included as a bad debt?

PeterSaxton wrote:

> On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> PeterSaxton wrote:
>> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> >> PeterSaxton wrote:
>>
>> >> > How is the money that company A lends to company B an expense for
>> >> > company A?
>>
>> >> If company B goes belly up and cannot repay the loan, then company A
>> >> would need to write it off as bad debt.  That would be an expense,
>> >> wouldn't it?
>>
>> > Which of the possible future events should be used in the accounts?
>> > Company B may pay out a lot in dividends. Should you treat that as
>> > profits before it happens too?
>>
>> What are you on about?  Who said anything about future events?  I simply
>> answered your question of how (i.e. in what circumstances) a loan can
>> become an expense.  Naturally it goes without saying that this cannot
>> be done until the circumstances have arisen.
>>
>> > Returning to sense, the money spent is an investment not an expense.
>> > It should appear on the balance sheet as an asset.
>>
>> Which is what I said, didn't I?
> 
> So, you admit that in the circumstances as outlined by the OP the
> payment should not be included as a bad debt?

No, I don't *admit* that, but I do *agree* that in the circumstances
as outlined by the OP the payment should not be included as a bad debt.

"Admit" is the wrong word.  To admit something is to recant its denial,
but I never denied it.  In fact I *said* that the payment should be
treated as a balance sheet asset, didn't I?

All I did, in response to your question, the tone of which suggested
the payment could *never* become an expense, was to illustrate a
circumstance in which, in due course, it *could*.  I didn't assume or
suggest that this circumstance would be likely.

On 13 Aug, 00:39, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> PeterSaxton wrote:
> > On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> >> PeterSaxton wrote:
> >> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> >> >> PeterSaxton wrote:
>
> >> >> > How is the money that company A lends to company B an expense for
> >> >> > company A?
>
> >> >> If company B goes belly up and cannot repay the loan, then company A
> >> >> would need to write it off as bad debt.  That would be an expense> >> >> wouldn't it?
>
> >> > Which of the possible future events should be used in the accounts?
> >> > Company B may pay out a lot in dividends. Should you treat that as
> >> > profits before it happens too?
>
> >> What are you on about?  Who said anything about future events?  I simply
> >> answered your question of how (i.e. in what circumstances) a loan can
> >> become an expense.  Naturally it goes without saying that this cannot
> >> be done until the circumstances have arisen.
>
> >> > Returning to sense, the money spent is an investment not an expense.
> >> > It should appear on the balance sheet as an asset.
>
> >> Which is what I said, didn't I?
>
> > So, you admit that in the circumstances as outlined by the OP the
> > payment should not be included as a bad debt?
>
> No, I don't *admit* that, but I do *agree* that in the circumstances
> as outlined by the OP the payment should not be included as a bad debt.
>
> "Admit" is the wrong word.  To admit something is to recant its denial,
> but I never denied it.  In fact I *said* that the payment should be
> treated as a balance sheet asset, didn't I?
>
You appear to be lying because you have been shown to be wrong.

See this quote from the dictionary: "To grant to be real, valid, or
true; acknowledge: admit the truth"

Make up your mind. Does it go on the balance sheet or as an expense? I
say balance sheet and not an expense.

> All I did, in response to your question, the tone of which suggested
> the payment could *never* become an expense, was to illustrate a
> circumstance in which, in due course, it *could*.  I didn't assume or
> suggest that this circumstance would be likely.-

The payment is never an expense. The payment always goes to the
balance sheet. If you subsequently find out that you need to make a
provision or write it off then you make a journal entry. The journal
entry would then include a line of expense but the payment for an
investment would never be an expense.

On 13 Aug, 06:31, PeterSaxton  wrote:
> On 13 Aug, 00:39, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
>
>
> > PeterSaxton wrote:
> > > On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote> > >> PeterSaxton wrote:
> > >> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> > >> >> PeterSaxton wrote:
>
> > >> >> > How is the money that company A lends to company B an expense for
> > >> >> > company A?
>
> > >> >> If company B goes belly up and cannot repay the loan, then company A
> > >> >> would need to write it off as bad debt.  That would be an expense,
> > >> >> wouldn't it?
>
> > >> > Which of the possible future events should be used in the accounts> > >> > Company B may pay out a lot in dividends. Should you treat that as
> > >> > profits before it happens too?
>
> > >> What are you on about?  Who said anything about future events?  I simply
> > >> answered your question of how (i.e. in what circumstances) a loan can
> > >> become an expense.  Naturally it goes without saying that this cannot
> > >> be done until the circumstances have arisen.
>
> > >> > Returning to sense, the money spent is an investment not an expense.
> > >> > It should appear on the balance sheet as an asset.
>
> > >> Which is what I said, didn't I?
>
> > > So, you admit that in the circumstances as outlined by the OP the
> > > payment should not be included as a bad debt?
>
> > No, I don't *admit* that, but I do *agree* that in the circumstances
> > as outlined by the OP the payment should not be included as a bad debt.
>
> > "Admit" is the wrong word.  To admit something is to recant its denial,
> > but I never denied it.  In fact I *said* that the payment should be
> > treated as a balance sheet asset, didn't I?
>
> You appear to be lying because you have been shown to be wrong.
>
> See this quote from the dictionary: "To grant to be real, valid, or
> true; acknowledge: admit the truth"
>
> Make up your mind. Does it go on the balance sheet or as an expense? I
> say balance sheet and not an expense.
>
> > All I did, in response to your question, the tone of which suggested
> > the payment could *never* become an expense, was to illustrate a
> > circumstance in which, in due course, it *could*.  I didn't assume or
> > suggest that this circumstance would be likely.-
>
> The payment is never an expense. The payment always goes to the
> balance sheet. If you subsequently find out that you need to make a
> provision or write it off then you make a journal entry. The journal
> entry would then include a line of expense but the payment for an
> investment would never be an expense.-

The payment is *always* an expense - that is what "expense" means.

In the Cash Book you have an Income side and an Expenditure side. If
you have Expenditure on purchasing a car, purchasing a car is an
Expense.

Troy Steadman wrote:

> On 13 Aug, 06:31, PeterSaxton  wrote:
>> On 13 Aug, 00:39, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> 
>> The payment is never an expense. The payment always goes to the
>> balance sheet. If you subsequently find out that you need to make a
>> provision or write it off then you make a journal entry. The journal
>> entry would then include a line of expense but the payment for an
>> investment would never be an expense.-
> 
> The payment is *always* an expense - that is what "expense" means.
> 
> In the Cash Book you have an Income side and an Expenditure side. If
> you have Expenditure on purchasing a car, purchasing a car is an
> Expense.

Now, now.  Don't get him riled.

Besides, the cash book has a Credit side and a Debit side, not Income
and Expenditure, and Expenditure and Expense aren't the same thing.
But you know all that fine well, you old rogue.

PeterSaxton wrote:

> On 13 Aug, 00:39, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> PeterSaxton wrote:
>> > On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>> >> PeterSaxton wrote:
>> >> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain>
>> >> > wrote:
>> >> >> PeterSaxton wrote:
>>
>> >> >> > How is the money that company A lends to company B an expense for
>> >> >> > company A?
>>
>> >> >> If company B goes belly up and cannot repay the loan, then company
>> >> >> A would need to write it off as bad debt.  That would be an
>> >> >> expense, wouldn't it?
>>
>> >> > Which of the possible future events should be used in the accounts?
>> >> > Company B may pay out a lot in dividends. Should you treat that as
>> >> > profits before it happens too?
>>
>> >> What are you on about?  Who said anything about future events?  I
>> >> simply answered your question of how (i.e. in what circumstances) a
>> >> loan can become an expense.  Naturally it goes without saying that
>> >> this cannot be done until the circumstances have arisen.
>>
>> >> > Returning to sense, the money spent is an investment not an expense.
>> >> > It should appear on the balance sheet as an asset.
>>
>> >> Which is what I said, didn't I?
>>
>> > So, you admit that in the circumstances as outlined by the OP the
>> > payment should not be included as a bad debt?
>>
>> No, I don't *admit* that, but I do *agree* that in the circumstances
>> as outlined by the OP the payment should not be included as a bad debt.
>>
>> "Admit" is the wrong word.  To admit something is to recant its denial,
>> but I never denied it.  In fact I *said* that the payment should be
>> treated as a balance sheet asset, didn't I?
> 
> You appear to be lying because you have been shown to be wrong.

Rubbish.  I have not been shown to be wrong.  I have *said* that it
should go on the balance sheet, I *agree* that it should not be shown
as a bad debt before it indeed vanishes in a puff of smoke.  Since
I haven't denied it, it makes no sense to say I *admit* it.

On the other hand, you have now admitted (having previously denied it)
that the payment *can* end up as an expense, though I agree that when
that happens, it will have gone to the balance sheet first.

> Make up your mind. Does it go on the balance sheet or as an expense? I
> say balance sheet and not an expense.

I haven't changed my mind, of course it bloody well goes on the balance
sheet, and I've said so from the outset.

>> All I did, in response to your question, the tone of which suggested
>> the payment could *never* become an expense, was to illustrate a
>> circumstance in which, in due course, it *could*.  I didn't assume or
>> suggest that this circumstance would be likely.-
> 
> The payment is never an expense. The payment always goes to the
> balance sheet. If you subsequently find out that you need to make a
> provision or write it off then you make a journal entry. The journal
> entry would then include a line of expense but the payment for an
> investment would never be an expense.

Exactly.  The amount initially goes to the balance sheet, and then,
should the need arise, a second transaction is required to move it
out to become an expense.

You seem to be interpreting the word "payment" as synonymous with
the first transaction.  That's a bit anal, innit?

On 13 Aug, 07:23, Troy Steadman  wrote:
> On 13 Aug, 06:31, PeterSaxton  wrote:
>
>
>
>
>
> > On 13 Aug, 00:39, Ronald Raygun <no.s...@localhost.localdomain> wrote:
>
> > > PeterSaxton wrote:
> > > > On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> > > >> PeterSaxton wrote:
> > > >> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> > > >> >> PeterSaxton wrote:
>
> > > >> >> > How is the money that company A lends to company B an expense for
> > > >> >> > company A?
>
> > > >> >> If company B goes belly up and cannot repay the loan, then company A
> > > >> >> would need to write it off as bad debt.  That would be an expense,
> > > >> >> wouldn't it?
>
> > > >> > Which of the possible future events should be used in the accounts?
> > > >> > Company B may pay out a lot in dividends. Should you treat that as
> > > >> > profits before it happens too?
>
> > > >> What are you on about?  Who said anything about future events?  I simply
> > > >> answered your question of how (i.e. in what circumstances) a loan can
> > > >> become an expense.  Naturally it goes without saying that this cannot
> > > >> be done until the circumstances have arisen.
>
> > > >> > Returning to sense, the money spent is an investment not an expense.
> > > >> > It should appear on the balance sheet as an asset.
>
> > > >> Which is what I said, didn't I?
>
> > > > So, you admit that in the circumstances as outlined by the OP the
> > > > payment should not be included as a bad debt?
>
> > > No, I don't *admit* that, but I do *agree* that in the circumstances
> > > as outlined by the OP the payment should not be included as a bad debt.
>
> > > "Admit" is the wrong word.  To admit something is to recant its denial,
> > > but I never denied it.  In fact I *said* that the payment should be
> > > treated as a balance sheet asset, didn't I?
>
> > You appear to be lying because you have been shown to be wrong.
>
> > See this quote from the dictionary: "To grant to be real, valid, or
> > true; acknowledge: admit the truth"
>
> > Make up your mind. Does it go on the balance sheet or as an expense? I
> > say balance sheet and not an expense.
>
> > > All I did, in response to your question, the tone of which suggested
> > > the payment could *never* become an expense, was to illustrate a
> > > circumstance in which, in due course, it *could*.  I didn't assume or
> > > suggest that this circumstance would be likely.-
>
> > The payment is never an expense. The payment always goes to the
> > balance sheet. If you subsequently find out that you need to make a
> > provision or write it off then you make a journal entry. The journal
> > entry would then include a line of expense but the payment for an
> > investment would never be an expense.-
>
> The payment is *always* an expense - that is what "expense" means.
>
> In the Cash Book you have an Income side and an Expenditure side. If
> you have Expenditure on purchasing a car, purchasing a car is an
> Expense.-

I disagree with your contention that expenditure equates to expense.

Capital expenditure is not an expense.

On 13 Aug, 10:58, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> PeterSaxton wrote:
> > On 13 Aug, 00:39, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> >> PeterSaxton wrote:
> >> > On 12 Aug, 13:20, Ronald Raygun <no.s...@localhost.localdomain> wrote:
> >> >> PeterSaxton wrote:
> >> >> > On 11 Aug, 03:53, Ronald Raygun <no.s...@localhost.localdomain>
> >> >> > wrote:
> >> >> >> PeterSaxton wrote:
>
> >> >> >> > How is the money that company A lends to company B an expense for
> >> >> >> > company A?
>
> >> >> >> If company B goes belly up and cannot repay the loan, then company
> >> >> >> A would need to write it off as bad debt.  That would be an
> >> >> >> expense, wouldn't it?
>
> >> >> > Which of the possible future events should be used in the accounts?
> >> >> > Company B may pay out a lot in dividends. Should you treat that as
> >> >> > profits before it happens too?
>
> >> >> What are you on about?  Who said anything about future events?  I
> >> >> simply answered your question of how (i.e. in what circumstances) a
> >> >> loan can become an expense.  Naturally it goes without saying that
> >> >> this cannot be done until the circumstances have arisen.
>
> >> >> > Returning to sense, the money spent is an investment not an expense.
> >> >> > It should appear on the balance sheet as an asset.
>
> >> >> Which is what I said, didn't I?
>
> >> > So, you admit that in the circumstances as outlined by the OP the
> >> > payment should not be included as a bad debt?
>
> >> No, I don't *admit* that, but I do *agree* that in the circumstances
> >> as outlined by the OP the payment should not be included as a bad debt> >> "Admit" is the wrong word.  To admit something is to recant its denial,
> >> but I never denied it.  In fact I *said* that the payment should be
> >> treated as a balance sheet asset, didn't I?
>
> > You appear to be lying because you have been shown to be wrong.
>
> Rubbish.  I have not been shown to be wrong.  I have *said* that it
> should go on the balance sheet, I *agree* that it should not be shown
> as a bad debt before it indeed vanishes in a puff of smoke.  Since
> I haven't denied it, it makes no sense to say I *admit* it.
>
Just because you said A and B it doesn't mean that you can't have said
A because you have said B. This is what you are trying to say.

> On the other hand, you have now admitted (having previously denied it)
> that the payment *can* end up as an expense, though I agree that when
> that happens, it will have gone to the balance sheet first.
>
The payment doesn't "end up" as an expense. I never said it did. I
have consistently said that it should be shown in the balance sheet as
an investment. You appear to be too influenced by Tim.

> > Make up your mind. Does it go on the balance sheet or as an expense? I
> > say balance sheet and not an expense.
>
> I haven't changed my mind, of course it bloody well goes on the balance
> sheet, and I've said so from the outset.
>
So I was right then?

> >> All I did, in response to your question, the tone of which suggested
> >> the payment could *never* become an expense, was to illustrate a
> >> circumstance in which, in due course, it *could*.  I didn't assume or
> >> suggest that this circumstance would be likely.-
>
> > The payment is never an expense. The payment always goes to the
> > balance sheet. If you subsequently find out that you need to make a
> > provision or write it off then you make a journal entry. The journal
> > entry would then include a line of expense but the payment for an
> > investment would never be an expense.
>
> Exactly.  The amount initially goes to the balance sheet, and then,
> should the need arise, a second transaction is required to move it
> out to become an expense.
>
> You seem to be interpreting the word "payment" as synonymous with
> the first transaction.  That's a bit anal, innit?-

The first transaction is a payment. The second transaction is a
journal. What is your understanding of a transaction?

In Ronald Raygun land: A sells a car to B for £1,000. B crashes the
car. Therefore, A crashes the car.

> Troy Steadman wrote:
>> The payment is *always* an expense - that is what "expense" means.
>>
>> In the Cash Book you have an Income side and
>> an Expenditure side. If you have Expenditure on
>> purchasing a car, purchasing a car is an Expense.-
>
"PeterSaxton" wrote
>I disagree with your contention that expenditure equates to expense.
>
>Capital expenditure is not an expense.

It is often very expensive.  Especially if it is a car!