Questions of Cash: Lending money to a friend: Is a loan or share capital a better bet?

Q I want to know the tax implications of lending a large sum to a friend. I am Spanish, normally resident and working in the UK. I want to lend money to a British citizen who is an entrepreneur. Should I provide the money as a loan, or as share capital? OB, Spain

Q I want to know the tax implications of lending a large sum to a friend. I am Spanish, normally resident and working in the UK. I want to lend money to a British citizen who is an entrepreneur. Should I provide the money as a loan, or as share capital? OB, Spain

On balance, you are probably better off using the money to buy shares, but this could reduce your chances of getting the money back if the venture folds. Robert Langston, tax manager at the accountants Grant Thornton, explains: "Tax relief should be available in respect of either form of investment if the company is unable to repay it. This relief will be available to reduce your taxable UK capital gains in the case of an unpaid loan, and against taxable UK income or gains in the case of shares. If you are working in the UK, then it is likely that you will be a UK resident [for tax purposes], although you will need to consider this in more detail and in light of any specific rules relating to Spain and/or your personal circumstances. The key differences between a loan or shares are income and risk. Income from a loan is interest, taxed at up to 40 per cent. Income from shares is a dividend, taxed at up to 25 per cent. Shares may increase in value, so you can participate in capital growth, but there may be little scope for a loan to increase in value over its term. The risk of losing your money may be greater if you invest in shares, as loan creditors of the company would be repaid before shareholders. There may be other tax reliefs available if you invest in shares."

Q Building and contents insurance premiums were included with my mortgage repayments to the Halifax. On insurance renewal last November, I requested my insurance payments to be debited separately as I was moving mortgage lender. I was told this would be done. My insurance payments were collected twice until I cancelled my mortgage with the Halifax in January. I have repeatedly and unsuccessfully tried to obtain a refund. JD, by email.

Halifax admits it has made a mistake and apologises. The £78 in overpayments it collected have been taken off your mortgage balance, so ultimately you have not lost out – though you have in cash terms. It is sending you £50 to compensate.

Q I have a granddaughter of nine and a grandson, 11. I want to invest £3,000 for each, to become available when they are 18 or 21. Schemes I have seen are either for five years, or require monthly investments. BP, Chelmsford.

Philippa Gee of the adviser Torquil Clark says that over such a long term, investing in an equity fund should produce results. She suggests considering the HSBC FTSE All Share tracker fund, or for an active fund, the Martin Currie UK Growth Fund. Alternatively, you might use National Savings Children's Bonds, which are for a minimum of five years, with renewal at the end of each five years. She says you should not restrict your consideration to schemes labelled as for children.

Q In January my wife and I set up an Egg internet-only savings account. A month ago, someone at Egg undertook some data maintenance and unintentionally changed my wife's profile. Since then, she has been unable to access her account. Do we have to close the account to sort it out? DS, by email

Egg apologises and is sending you what it describes as "a gesture of goodwill". It says it has now corrected your problems, which it agrees were caused by a processing error by a member of staff. This should have been picked up and resolved by Egg and it accepts that the problem was made worse by its poor customer service in failing to respond properly to your complaints. Egg describes that as "an isolated problem", though we have received several other letters complaining about difficulties with Egg's website.