How to make the most from money in company bank account?

[Robot]

If it is any reassurance, I know of several partners in prestigious accounting firms that do this with their own companies.

Puma

Puma

Are these ‘partners’ Directors of limited companies or partners of a Limited Liability partnership?

[THEPUMA]

Puma

Are these ‘partners’ Directors of limited companies or partners of a Limited Liability partnership?

Directors.

[TykeMerc]

Interesting viewpoint Puma and well backed up.

I've got an offset mortgage, but my Business accounts are in a totally different bank from my personal and mortgage accounts, does that have any bearing on the treatment if funds are banked as you suggest?

[kingcook]

The basic premise is that the company is not loaning the money to you. It is depositing its money in your bank account.

So can i go an mug someone, and, as long as i promise to pay it back sometime without actually spending it, can i just say i borrowed it?

[Wanderer]

So can i go an mug someone, and, as long as i promise to pay it back sometime without actually spending it, can i just say i borrowed it?

I think the analogy is that you give something to someone to look after, but it's still yours, the person who is looking after it isn't allowed to do anything with it and you can take it back at any time.

[THEPUMA]

Interesting viewpoint Puma and well backed up.

I've got an offset mortgage, but my Business accounts are in a totally different bank from my personal and mortgage accounts, does that have any bearing on the treatment if funds are banked as you suggest?

Hi TykeMerc

The business cash would have to be transferred into one of the offset deposit accounts with your mortgage lender.

Puma

[dynamicsaxcontractor]

Hi TykeMerc

The business cash would have to be transferred into one of the offset deposit accounts with your mortgage lender.

Puma

This is one of the more interesting threads I have read for a long time.

Could you please explain in more detail how this would actually work and what kind of paperwork needs to be drawn up.

I really don't like having £50000+ in my company bank account and I don't want to take it out as dividends at times as this put me in a higher tax band. The idea of not only having the money helping paying off the mortgage but actually protecting the money if the bank goes bust is fantastic.

[moorfield]

This is one of the more interesting threads I have read for a long time.

Could you please explain in more detail how this would actually work and what kind of paperwork needs to be drawn up.

I think THEPUMA's Plan B is taking off nicely. Job Done.

[THEPUMA]

This is one of the more interesting threads I have read for a long time.

Could you please explain in more detail how this would actually work and what kind of paperwork needs to be drawn up.

I really don't like having £50000+ in my company bank account and I don't want to take it out as dividends at times as this put me in a higher tax band. The idea of not only having the money helping paying off the mortgage but actually protecting the money if the bank goes bust is fantastic.

I normally put in place a minute of a directors' meeting setting out for the rationale for doing this and approving it at Board level. I then put in place a deed of trust which puts the legal framework in place showing that the monies remain the property of the company.

Most offset mortgage providers will offer a number of accounts which can be offset against the mortgage so I would ringfence one of them for company monies so that it doesn't get mixed up with personal monies.

An interesting variation on a theme, which none of my clients have done but which in theory I believe would work is as follows:-

I have a company worth £1million with no mortgage on it. I have £200K in my company bank account.

I apply for an offset mortgage of £200K. The lender therefore writes me a personal cheque for £200K. I immediately offset the company's money against the mortgage.

The net result is that I have extracted £200K from the company tax-free (until I close the company at which point I will pay 10%).

Seems to good to be true and probably a step too far for most. Also more difficult to justify from the security angle. But in theory I can't see where a challenge would come from.

Puma

[Olly]

PLease can we have a think about what the downsides are?
I'm just having a really hard time getting over the fact that many/most contractors of which there are 100's of thousands in the UK probaly don't use this approach and yet have a fair balance in their Ltd's accounts.
What's the worst that could happen if HMRC dont' like it?
You'd have to pay interest to your Ltd on the company's money at their standard rate (4 something %)?
Anything else?