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paying back money borrowed from my savings

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  • 14-04-2016 11:33am
    #1
    cjmc11
    Registered Users Posts: 134 ✭✭


    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


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    #2
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #3
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭Graham


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


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    #4
    xabi
    Registered Users Posts: 2,998 ✭✭✭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/


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    #5
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #6
    xabi
    Registered Users Posts: 2,998 ✭✭✭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?


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    #7
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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?


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    #8
    xabi
    Registered Users Posts: 2,998 ✭✭✭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?


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    #9
    cjmc11
    Registered Users Posts: 134 ✭✭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.


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    #10
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #11
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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


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    #12
    cjmc11
    Registered Users Posts: 134 ✭✭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.


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    #13
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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?


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    #14
    xabi
    Registered Users Posts: 2,998 ✭✭✭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?


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    #15
    xabi
    Registered Users Posts: 2,998 ✭✭✭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?


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    #16
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #17
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭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.


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    #18
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #19
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭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.


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    #20
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #21
    cdeb
    Moderators, Sports Moderators Posts: 7,244 Mod ✭✭✭✭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.


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    #22
    Graham
    Moderators, Society & Culture Moderators Posts: 17,642 Mod ✭✭✭✭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.


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    #23
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #24
    cdeb
    Moderators, Sports Moderators Posts: 7,244 Mod ✭✭✭✭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.


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    #25
    xabi
    Registered Users Posts: 2,998 ✭✭✭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.


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    #26
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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


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    #27
    cdeb
    Moderators, Sports Moderators Posts: 7,244 Mod ✭✭✭✭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)


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    #28
    xabi
    Registered Users Posts: 2,998 ✭✭✭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.


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    #29
    cdeb
    Moderators, Sports Moderators Posts: 7,244 Mod ✭✭✭✭cdeb


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


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    #30
    sKeith
    Closed Accounts Posts: 13,404 ✭✭✭✭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.


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    #31
    cjmc11
    Registered Users Posts: 134 ✭✭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.


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