Director's Loan Vs Share Capital

[kaps84]

Hi All / Seniors,

I am naive to choose between making my £200,000 pound investment into the company by way of Director's loan or as the Share capital.

Could someone please guide me what are the pros and cons of each?

A quick google search suggests that share capital is the better way with respect to worst case scenario, where I can get the tax relief on personal income tax. However, I have taken and will take minimum salary to keep my personal taxes to the minimum.

Moreover, my business model is the IT services provider (selling services) and hence I do not have much of my creditors (until my client makes a wild claim that the services I have provided ruined their business).

Please advise me keeping T1E extension in mind.


Kind Regards,
Kaps

[zimba]

Director's loan is the most common form of investing your business, it makes no sense to buy the shares of your own company when you are the only shareholder !

[Faheemryk]

If you are going to invest through director loan, then please ensure that you can show
money transfers from your personal bank account to business bank account. e.g. like I showed
4 transfers , £30,000 , £10,000, £10,000 and £2,000 transfers. I am on £50,000 route.
These transfers must be supported by director loan agreement(s)

If transfer come from cash deposits or from anyother accounts then yours(assuming you are director/entrepreneur ) , then there might be problem.


As far I have knowledge, for share capital investment, you dont need to show bank transfers. However, I d suggest you to take advice of some expert accountant.

[marcnath]

If you are going to invest through director loan, then please ensure that you can show
money transfers from your personal bank account to business bank account. e.g. like I showed
4 transfers , £30,000 , £10,000, £10,000 and £2,000 transfers. I am on £50,000 route.
These transfers must be supported by director loan agreement(s)

If transfer come from cash deposits or from anyother accounts then yours(assuming you are director/entrepreneur ) , then there might be problem.


As far I have knowledge, for share capital investment, you dont need to show bank transfers. However, I d suggest you to take advice of some expert accountant.

Agree with @Faheermryk. Share capital or DL are both equally acceptable under immigration rules. The pros and cons only relate to the evidence to be submitted. Share capital requires less documentary evidence but DL is not much more.

There are implications beyond immigration rules and you should discuss that with your accountant.

[kaps84]

Thanks everyone for your valuable replies. Could some please tell me how investing via share capital results in sending less documents to HO?

What all financial documents will be required if I invest via share capital? Does that not need me to send personal and business bank statements to HO?

[marcnath]

Thanks everyone for your valuable replies. Could some please tell me how investing via share capital results in sending less documents to HO?

What all financial documents will be required if I invest via share capital? Does that not need me to send personal and business bank statements to HO?

Investment via share capital only requires the correct confirmation in the Accounts - bank statements are not needed.

[kaps84]

Thanks Marcnath.

When you say bank statements are not required, i assume you are saying it for both personal bank statements and business bank statements.

Could you please elaborate a bit why the bank statements are not required? I request this since I am not able to figure out the reason.

However, I see people having invested via share capital sending the business bank statements. I would prefer not to send the bank statements but I want to be 100% sure that it is not required and yet I am sending all the required documents.

[marcnath]

Thanks Marcnath.

When you say bank statements are not required, i assume you are saying it for both personal bank statements and business bank statements.

Could you please elaborate a bit why the bank statements are not required? I request this since I am not able to figure out the reason.

However, I see people having invested via share capital sending the business bank statements. I would prefer not to send the bank statements but I want to be 100% sure that it is not required and yet I am sending all the required documents.

The reason you don't need bank statements is because the guidelines do not list it under the required documents for share capital. The guidelines does specify all the documents that are needed to evidence each attribute.