Business money

[ScoobyDoo]

Hi,

Just wondering if someone can clear something up for me - do you have to keep the cash from a ltd company in a business bank account? Is it ok to withdraw this money and say have it in an offset personal account, but not use any of it, pay tax as per normal etc?

Reason I ask is a colleague of mie has done this for several years and seems to think it's perectly legit, which took me by surprise.

Any suggestions?

[DaveB]

No it is not ok. Company money is company money. As soon as it leaves the Co. account and lands in your personal account it becomes your money along with all the tax implications that go with it. If he's been doing that he's leaving himself open to a huge tax bill for unpaid income tax and NI payments on the company funds he transferred to his personal account.

[Emperor Dalek]

Mixing business money and personal money, like most things, is "fine" until you are audited, and I'm guessing your mate never has been. As soon as it is uncovered that you have been mixing the two, at that point your entire life will be taken apart by HMRC and you'd better have receipts and audit trails showing where the money came from for every single item in your house because they will claim virtually everything you own was probably bought with company funds and seek to tax it accordingly. I've seen this happen to a mate, it wasn't pretty.

Leave the two funds well apart. Company money is not your personal slush fund. A mistake that many novice contractors make to their cost.

[Pondlife]

My understanding is that you cannot use YourCo's money in an offset account (the rules are different for the self-employed). Any money you took out that was not in the form of salary or divs would be considered as a directors loan and would have tax implications above a certain limit (£5K IIRC).

[Darren@UptonAccountants]

Company money

Company money is an asset of the company. If it is removed from the company, then it no longer belongs to the company and is then owned by you (if put into your personal bank account).

This can be taken as a loan (max. £5k without any benefits in kind), salary, dividends, etc....

In conclusion, don't do it!! Keep the 2 funds separate....if you need a higher rate company account, drop me a line and we'll sort you out with a Cater Allen account that pays better than the high street mob.

[Ruprect]

lol that boy's in trouble when hector comes knocking...

[Emperor Dalek]

Reason I ask is a colleague of mie has done this for several years and seems to think it's perectly legit, which took me by surprise.

Oh yes, if the fate of this colleague of yours means anything to you, you should seriously advise him to act to put matters right now. Including firing the accountant that told him it was alright to do this.

[DanTheMan]

So say you have a ltd company bank account. You can transfer money via salary and/or dividend to your own personal account. But what if you want to put aside some money things like the tax bill and unforseen payments? Can you transfer money form the company to another (different) personal account? Or are you best just taking a bigger pay packet and then putting some aside from that account?

[Emperor Dalek]

Company money = the company's money
Company account = for the company's money only

Personal money = your money
Personal account = for your money only

Never the twain shall meet unless properly accounted for, i.e. an (eventually) repaid loan of up to £5k tax free, beyond this taxed as a BIK.

"Put aside" company money in a company account. Anything else is asking for trouble. Darren (above) has offered to help anyone who needs a high interest company account for storing company money.

[Pondlife]

But what if you want to put aside some money things like the tax bill and unforseen payments?

Get a business reserve account to keep the money in the company allbeit at a higher interest rate. I'm assuming your talking about Corp Tax bill and unforseen business costs and NOT your self assesment or personal costs.

HTH