I am doing the books for a limited company, recently changed from sole trader status. They have an accountant to produce the final accounts and prepare and submit tax returns.
I have been asked if the father can lend money he will borrow to the company. The money will be used to repay a vehicle loan in full. Then the company will pay the father the capital plus the interest he is paying (this will be cheaper then the current loan).
In the ltd company accounts I would open a loan account in the normal way - it doesn't matter that the loan is from a relative?
From the father's point of view: would he have to pay income tax on the interest earned even though he will be paying the same interest figure to his loan company? I think so, but I'm not sure.
I would appreciate any help