The loan that had to keep HMRC happy as well as the lender

A South East dental business needed start-up finance for a new entity and a refinance of an existing company loan at the same time. Moving funds between the two companies raised questions under HMRC’s loan relationship rules. We structured the deal to satisfy both the lender and HMRC, arranging around £800,000 in total.

The Situation

A dental business in the South East came to us with a genuinely two-part requirement: start-up finance for a newly incorporated practice entity, alongside a substantial refinance of an existing company loan. Either one of those on its own is a manageable, fairly standard piece of work. Together, they created a real structuring problem rather than just a bigger version of a simple one, since the two facilities needed to sit alongside each other without one undermining the other.

The complication sat in the inter-company lending structure. Lending to the established, existing entity was straightforward enough on its own terms. The difficulty was in transferring those funds across to the new company, which raised genuine questions under HMRC’s loan relationship rules, rules that govern how loans between connected companies are treated for tax purposes. This isn’t a box-ticking technicality, get the inter-company lending treatment wrong and it can create real tax and compliance problems well after the money has already moved, at exactly the point they’re hardest and most expensive to unwind.

What We Did

We worked through the structure methodically rather than treating it as a straightforward refinance-plus-start-up request that could be assembled from two standard applications. That meant proper legal documentation, bringing the client’s own tax advisors into the process early rather than after the structure was already fixed, and building a framework that satisfied both the lender’s requirements and HMRC’s rules on inter-company loans at the same time, not sequentially, and not as an afterthought once the finance itself was agreed in principle.

The Result

We arranged the full loan of around £800,000, covering both the refinance of the existing facility and the start-up finance for the new entity, structured in a way that held up to scrutiny on both the lending and the tax side, giving the client confidence the arrangement wouldn’t unravel under later examination.

The broader point here is one that applies well beyond this specific case: a lot of this work is about getting the structure right, not just finding the number. Get the structure wrong, and the amount of finance secured stops being the thing that matters, because the tax exposure created can outweigh whatever was gained on the lending side. Anyone whose situation involves more than one company, or anything that touches HMRC’s rules on inter-company lending, is better off having that conversation before committing to a structure, not after the money has already moved between entities.

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