Money loaned to a limited company

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    david farrar

    I have a claimant who took out an interest only mortgage on her home in 2006 and loaned the sum of £143,600 to a limited company. The company is paying the interest on the mortgage.

    The limited company had 3 shareholders. The claimant (36%), her brother (36%) and their mother (28%). The claimant is not employed by the company, nor is she a director. Her brother is the company secretary and their mother is a director.

    In 2007, the company purchased a property to develop.

    In 2009, the claimant moved out of the property she owned and into the property purchased by the company in 2007. Her former partner remained in the former home. She claimed Housing Benefit in respect of her liability to the limited company.

    The Local Authority was not aware that the claimant: –
    was a major shareholder of the landlord
    had loaned the company £143,600
    was a joint owner of former home

    The claimant is suggesting that the loan to the company should not be treated as a capital asset as it should be offset against the mortgage. However this would mean that the mortgage was being used to offset the value of the former home and the loan.

    Am I right in thinking that the loan to the company is capital?
    And would I be right to assess it at £71,800?


    I think the start point would be the value of the company, she is not self-emplyed or can be treated as one, so it’s just any other investment.

    If the company is not worth anything then the rest of the issues are a moot point. How do you value the company? Good luck with that. I think you will be hard pressed to convince a judge she got rid of capital in order to increase/claim benefit because of the time lines described in your post.

    Just to add, the capital asset can’t be used to offset the mortgage unless she actually receives the capital and pays the mortgage provider, unless of course it falls under other capital disregards.


    I’d be tempted just to turn it down under reg 12(2) – she’s an owner of the company, the company owns the property she is renting, therefore she is “an owner”.

    Failing that, look at the company balance sheets.

    david farrar

    Thanks Kay and Mwigg for your responses.

    I was tended more towards the sum loaned being either capital being available on application, or alternatively a chose in action (though how to value a chose in action!!!).


    If this is an appeal I would cover all bases:
    She is not entitled because she is an owner,
    or reg 9 applies and she is treated as not liable
    or capital value of her share of the company exceeds £16K
    or value of the loan is available on application and exceeds £16K
    or value of chose in action exceeds £16K
    or [anything else you can think of]

    david farrar

    cheers for your advice

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