Thanks for your post - my Name is ***** ***** I am one one of the UK tax experts here on Just Answer.
I should advise thata s things stand HMRC di not viw peer to peer lending as a tarde but as investment income - so I a little surprised that you haev set this up through a limited company.
And therefore, this is not treated as relevent income and so cannot have relevent pension contributions made from it into your SIPP (or your wifes)
I am sorry to be the bearer of bad news, but I do urge you to remedy this limited company position as amatter of urgency - as the advsie I assumed you sought at the time, has not steered you well.
Hi Sam, many thanks for your reply.
I set up the limited company for the Peer-to-peer lending in order:
1) to get full relief for losses on loans
2) to pay corporation tax on the net income, rather than higher rate income tax with the intention of taking dividends some time in the future when my personal taxable income was below the higher tax threshold.
Are there in your opinion any issues with regard to my achieving these two objectives by investing in loans through a limited company?
When setting up the limited company I did ask the question below re the possibility of paying pension contributions from the limited company but it seems that this advice was not good. Are there other ways I could generate relevant income for pension contributions through my investment activities? My wife and I are retired and do not have earned income.
Question "I do not need to take a salary from the company but are there any benefits to my being an employee of the company and paying myself a salary? Could I contribute the whole of the salary paid into a pension? If so, I guess I would avoid paying income tax on the salary but would still have to pay NI?"
Answer: "As a director you are by definition an employee and there is no way round this unless you relinquish your directorship. The company could indeed pay you by means of paying into a pension fund, but that payment must pass direct to the pension providor and not via any of your personal accounts. Such payments would avoid NI. These payments would reduce the profits of the company assessable for CT, but, again, beware of the fraudulent preference. If you personally receive the funds as salary and then pay them into a pension fund (up to 100% of salary, but see the following additional limits) you would indeed be liable to NI, but would escape income tax providing you did not exceed pension contribution limits, 50K 13/14 tax year, 40K thereafter. You personally may also bring forward any unused contribution limits from the previous three years."
Thanks for your response
At this time there are no claims permissable for losses on the loans you make - although there discussions around this taking place within HMRC for the future position and I understand why you have set up as alimited company, but must advsie only trade income can operate through a limited company - of which this is not, so you need to rectify this with HMRC.
Any return you make on your money is treated as untaxed interest - link here re the treatment of this http://www.hmrc.gov.uk/manuals/saimmanual/SAIM2400.htm
And this link when money lending can be deemed to be a trade
Can you advise what income you have other than investment or pensions ? Because if none then you have no relevent income on which contributions can be based.