Bank loan

[sri]

Hi, I would like to know how to do deal with situation. I have company A bought shares in company B. Company A took bank loan for the same. How to transfer funds from B to A to pay bank loan? Invoicing attracts lot of VAT, I would like to avoid unnecessary VAT filing here. Please suggest me the best practice. Thank you.

[QFSteve]

Hello @sri

I found the below in the forum which may help but it would be best to consult your accountant for professional tailored advice.

Investments from external (non-director) shareholders - which category?

It sounds like you are getting money from investors without them getting anything in return, no security on their investment not even their money back as you said it would not be a loan, and you are not selling them shares, if that’s the case treat the money invested as if you were putting it into your business yourself so tag it to your directors loan account. Normally investors invest their money in company shares getting their return via dividends from profits or a mix of dividends and shar…

[FaradayKeynes]

That will be intercompany loan, simple bank entry or journal will do, no need to invoice hence no question of vat

[ChrisA14]

Hmmmm im not sure I wouldwant to argue its a straight intercompany loan because of the use of the funds.

If B is giving money to A to pay back a loan which was used to buy shares in B, then

Either its a dividend from B and A can use in any way it wishes

Or B has effectively funded A to buy its shares which depending upon the ownership of the 2 companies could be straying into share buyback teritory.

I dont really understand the purpose of the transaction

[sri]

Thank you chrisA14 trying to answer my query, I think I need to give more details to get specific advice.
I own company A, took bank mortgage loan to buy 100% shares in company B. All my revenues now generated in company B. There is no special income in company A. I haven’t got any revenue to pay mortgage loan and interest in company A. Company A need source of money to repay mortgage and interest on bank loan. What is the best way to transfer the money from company B to A. I reckon dividend tax will be attracted if I pay back as dividends, VAT has to be levied if I transfer through invoicing. I would like to know what is the best way in this case.
Thanks in advance.

[cbstephensaca]

It sounds as though you need to speak to a qualified accountant or tax practitioner. This is not simply a question of how to handle the bookkeeping entries in QuickFile. Please seek professional advice on this one.