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paying back money borrowed from my savings

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    #32
    cdeb
    Moderators, Sports Moderators Posts: 7,244 Mod ✭✭✭✭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.


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    #33
    CIARAN_BOYLE
    Registered Users Posts: 14,599 ✭✭✭✭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?


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    #34
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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.


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    #35
    cjmc11
    Registered Users Posts: 134 ✭✭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.


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    #36
    CIARAN_BOYLE
    Registered Users Posts: 14,599 ✭✭✭✭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'.


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    #37
    sKeith
    Closed Accounts Posts: 13,404 ✭✭✭✭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.


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    #38
    cjmc11
    Registered Users Posts: 134 ✭✭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


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    #39
    BnB
    Registered Users Posts: 1,085 ✭✭✭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.....


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    #40
    bmwguy
    Closed Accounts Posts: 2,006 ✭✭✭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


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    #41
    Books4you
    Closed Accounts Posts: 78 ✭✭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.


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    #42
    Avatar MIA
    Closed Accounts Posts: 6,750 ✭✭✭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 ;)


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    #43
    cjmc11
    Registered Users Posts: 134 ✭✭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.


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    #44
    cjmc11
    Registered Users Posts: 134 ✭✭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.


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    #45
    Axwell
    Moderators, Computer Games Moderators Posts: 10,462 Mod ✭✭✭✭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.


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    #46
    jimmii
    Registered Users Posts: 14,810 ✭✭✭✭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.


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