Taxation logo taxation mission text

Since 1927 the leading authority on tax law, practice and administration

Cash and co

21 July 2009
Issue: 4215 / Categories: Forum & Feedback , Employees
A limited company has substantial cash balances, but it is believed that a better interest rate can be obtained from a personal bank account. What are the tax implications if the company loans the cash to the director, who then opens an account in his own name?

A client close company has substantial cash balances earning interest now at a derisory rate. Individual savings seem to attract a higher interest rate than corporate deposits.

The managing director (MD) and controlling shareholder has suggested that an account be opened in his name as undisclosed agent for the company.

The intention would be that he declares himself bare trustee for the company and a suitable document evidencing this be drawn up and signed and sealed on behalf of him and the company so that there is no doubt about the arrangement.

The company would then pay money under such an arrangement to the MD which he would immediately deposit in a separate account.

All the interest would accrue to the company and there would be no intermingling of personal and company funds; the balance in the account would belong wholly to the company. Interest credited would be included...

Only subscribers may read the full article

Alternatively, you can register free of charge to read a limited amount of subscriber content per month.
Once you have registered, you will receive an email directing you back to read this item in full.
back to top icon