Bank Accounts
Before your company bank account was set up you had to use
your personal account, is there a safe way to deal with this?
Personal Account
You weren’t able to open a company account right away, thus
you had to use your own personal bank account to pay suppliers and
receive money from customers with. There isn’t actual any
legal requirement to have a company bank account, so this would
leave us to believe there would be absolutely no problems with using
the directors account. Unfortunately its not that simple, the director
is effectively receiving money from the company every time a customer
pays you, and introducing money into the company every time (s)he
pays a supplier off. This has certain tax implications for both
the company and the director.
Record
All receipts and all payments going through the personal bank account
for the company should be recorded in the company’s books.
Debit all money received from customers to the director’s
loan account and credit all payments made on behalf of the company
to the same account.
Claim
Complete an expenses claim form detailing all the business expenses
you forked out for personally so that the payments are valid business
expenses. Remember to attach the relevant invoices (or copies of)
to the back of the form, if you didn’t get an invoice, attach
the bank, or credit card statement with the transaction on it.
Loan
While ever you’ve paid out more for the business from your
personal account then you have received then there won’t be
any further problems. However, if the money received outweighs the
payments made, the directors loan account will be overdrawn and
appear that the company has loaned you money.
Tax
If the ‘loan’ is over £5k then you’ll be
paying a benefit-in-kind personally, and, if the account is still
overdrawn 9 months after the company’s year-end, the company
will also have to pay a fixed tax rate of 25% on that balance. Once
the loan has been repaid, the said tax can be reclaimed, but it
takes a further 9 months after the accounting period it was paid
in.
Summary
If the company has given you more money then you have given it,
then it will appear the company has given you a loan. Make sure
this is paid back into the business before the 9 months is up to
ensure the 25% tax isn’t incurred. A simple way of achieving
this, if you’re a shareholder and the company has sufficient
profits is to vote yourself a dividend.
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