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

[Bunk]

Surely you're going to have to pay tax on the benefit you've received from this, ie the amount that your repayments have been lowered by using the companies money to offset your personal mortgage?

[escapeUK]

I'm not doing this myself, yet. But I am aware that banks are offering it:-

Your business funds could cut your personal mortgage
RBS | Business Offset Service | Help to cut your personal mortgage

hmmm just noticed it says

"You need to be in business as a sole trader or simple partnership."

[THEPUMA]

Surely you're going to have to pay tax on the benefit you've received from this, ie the amount that your repayments have been lowered by using the companies money to offset your personal mortgage?

No there is no mechanism for taxing the benefit.

[THEPUMA]

I stand corrected!

I'd be interested in knowing more if you care to divulge. Otherwise I will follow up with my accountant.

TIA

It will be easiest to explain on the phone. PM me your number an I'll call you.

[THEPUMA]

You've said this a few times now and we're all very interested in how????

Are you doing it yourself and it's stood up to investigation by HMRC?

Thanks Olly

Never been investigated.

[THEPUMA]

I think we would all like to know more - surely its just an interest free loan?

No because legally it isn't a loan.

[moorfield]

Is this something that can be done via the usual Cater Allen ltdco setup does anyone know?

[Wanderer]

My understanding is that if a company puts money into the account of another person or company then it is a loan an you have to pay tax on it. If there is something that I can do with the substantial wad of money that I (and probably most people here) have sitting in the bank and earning no interest while the same bank charges us a fortune to lend the same money back to us, we'd like to know about it.

I'm sure there are lots of people who are intrigued by this. Would you care to explain it for the benefit of all of us? I do get the feeling that HMRC have this one pretty well tied up but I would be delighted to be proved wrong!

It will be easiest to explain on the phone.
Never been investigated.
legally it isn't a loan.
It's your company. Who is going to stop you from doing it?

So, if it's never been investigated then how do we know it's within the rules? Or is this just the "head-in-the-sand" school of accounting?

It's your company. Who is going to stop you from doing it?

You are exactly right! No one will stop us! We're free to do what we want!!

But as an accountant once told me, as the director of the company you can do whatever they like, claim whatever expenses you like and run your business however you like but if you get investigated and found to have done something wrong then you will have to pay the tax and penalties too.

So generally, people try to follow the rules, maybe bending them a little sometimes.

[ASB]

A correctly drawn up deed of trust establishing the true ownership of the funds should do it.

Popular wisdom may say you cant and there is the risk of challenge. Popular wisdom is often wrong.

[THEPUMA]

My understanding is that if a company puts money into the account of another person or company then it is a loan an you have to pay tax on it. If there is something that I can do with the substantial wad of money that I (and probably most people here) have sitting in the bank and earning no interest while the same bank charges us a fortune to lend the same money back to us, we'd like to know about it.

I'm sure there are lots of people who are intrigued by this. Would you care to explain it for the benefit of all of us? I do get the feeling that HMRC have this one pretty well tied up but I would be delighted to be proved wrong!



So, if it's never been investigated then how do we know it's within the rules? Or is this just the "head-in-the-sand" school of accounting?



You are exactly right! No one will stop us! We're free to do what we want!!

But as an accountant once told me, as the director of the company you can do whatever they like, claim whatever expenses you like and run your business however you like but if you get investigated and found to have done something wrong then you will have to pay the tax and penalties too.

So generally, people try to follow the rules, maybe bending them a little sometimes.

The basic premise is that the company is not loaning the money to you. It is depositing its money in your bank account. There is a crucial difference. If the company loans money to you, typically you can do what you want with it. You can go and spend it on beer and holidays if you want. If the company deposits its money in your bank account then per the terms of the paperwork my clients have in place, they can't touch it.

As such it isn't a loan and isn't taxed like one.

I don't think you have to justify your actions but if you did, many of my clients have cash in the bank earning little or no interest. If the bank goes under, they will lose their deposits. If it is offset against their personal mortgage, it may be more secure (you would need to check the T&Cs of the mortgage lender to see whether loans and deposits are netted off for these purposes). So the company is foregoing little or no interest for greatly enhanced security.

It has never been investigated and is unlikely to be. HMRC rarely ask for evidence to support the cash at bank figure on the accounts.

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

Puma