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A new partner in a successful firm is required to introduce capital funds into the business. His wife has surplus cash in a savings account that she could lend to her husband
Our new client has recently become a partner in a successful trading business. He is a higher rate and additional rate taxpayer and is required to contribute capital to a partnership.
The client could obtain a loan from the bank and claim income tax relief on the interest incurred. However his wife is a basic rate taxpayer and has surplus funds that she inherited from a family member which are simply sitting in her bank account and earning very low rates of interest.
We are wondering whether the wife could lend money to her husband who will in turn lend the money to the partnership. Any interest paid by the partnership would then be declared on the tax return by the wife. Is this correct?
Is the above sequence of loans possible and would the settlements legislation come into play here?
Query 18 369– Lender
