Contractor with offset mortgage

**b0redom** · 4 April 2011, 11:12

You don't pay VAT when you remove money from the company, you (usually) pay it quarterly on your sales.

The company money belongs to the company, not to you, so no you can't just move it around willy-nilly.

Various methods of doing what you suggest have been mooted, but as far as I know the fact that it's not being done by lots of people means they are potentially quite dodgy - talk to your accountant.

"I can appreciate that many might say that contractors should not be money savers but I'm in a bit of a pinch at the moment."

Are you really sure you should be starting contracting now then? I presume you're moving from a permie role? It's not for the faint of heart, or a get rich quick scheme - it's a lifestyle choice, and you may have weeks / months of voids where you're not working.

**TheFaQQer** · 4 April 2011, 11:15

Originally posted by Tilamok View Post

My question is :- Can I either
1) Move money from my business a/c to my mortgage a/c without paying immediately any monies to tax/vat. Then just before the end of the tax year, pay as a lump sum any monies due to tax/vat???

I'm not trying to scam anyone, just trying to delay payment to tax/vat so that I pay less interest on my mortgage

To take money out of the company, you need either a directors loan or to declare a dividend. Dividends can only be paid out of profit. If you take out a loan which is too large, then it counts as a benefit in kind and you pay tax on it. The loan also needs to be repaid.

Originally posted by Tilamok View Post

2) Another way to do point 1 above, is to get a business account that can gives a no-interest loan that matches the balance in the business account. Does anyone know of such business accounts?

No. Can't think of why anywhere would be offering a 0% loan.

Originally posted by Tilamok View Post

I can appreciate that many might say that contractors should not be money savers but I'm in a bit of a pinch at the moment.

You need to learn that the money in the company is not yours, regardless of how tight the pinch is. If you confuse the two, then you are going to end up in all sorts of bother.

If you have money in the company account which is profit, then declare a dividend and stick the money in your offset mortgage. Then draw against that over the year as you need to, rather than having salary.

Also - if you can't save money, contracting probably isn't the answer, to be honest. If things are tight now, how will they be when the first contract ends and you are out of work for 6 months before another one comes along?

**Tilamok** · 4 April 2011, 11:42

Thanks for the replies

I have removed the "pinch" because this is a secondary issue and losing focus on what I was really after.

**prozak** · 4 April 2011, 13:56

it is not your money.

you either need to

1. pay a salary
2. pay a dividend
3. loan the money to the director (bik implications)

**northernladuk** · 4 April 2011, 14:05

You already asked this question once in one of your other threads below..

http://forums.contractoruk.com/gener...tml#post832753

What is more annoying is that you were also told in that thread this has been done a load of times so use the search. Instead you post it twice??

**Tilamok** · 4 April 2011, 16:46

Originally posted by northernladuk View Post

You already asked this question once in one of your other threads below..

http://forums.contractoruk.com/gener...tml#post832753

What is more annoying is that you were also told in that thread this has been done a load of times so use the search. Instead you post it twice??

Sorry
Could u please delete the thread if u can

Thanks

**Wanderer** · 4 April 2011, 21:44

Originally posted by Tilamok View Post

1) Move money from my business a/c to my mortgage a/c without paying immediately any monies to tax/vat. Then just before the end of the tax year, pay as a lump sum any monies due to tax/vat???

Blah, it's been discussed at great length here. Try doing a search for "Director's loan".

Presuming you are the only shareholder, it's your company so you can do what ever the hell you like with it. If the company makes an interest free loan then you pay tax on the benefit in kind. If you get investigated then they may seek to treat the loan as salary (especially if the "loans" are taken out weekly/monthly) and whack you with a big PAYE/NI bill. Read all about director's loans here: HM Revenue & Customs: Directors' loan accounts and Corporation Tax explained

Ask your accountant for advice, though they will probably tell you not to do it because people have a habit of clearing out the company's bank account, spending the money and then having none left when it comes to pay the tax man in a year or so, thus getting themselves in all manner of tulip and generally upsetting Hector.

**Tilamok** · 4 April 2011, 23:23

Originally posted by Wanderer View Post

Blah, it's been discussed at great length here. Try doing a search for "Director's loan".

Presuming you are the only shareholder, it's your company so you can do what ever the hell you like with it. If the company makes an interest free loan then you pay tax on the benefit in kind. If you get investigated then they may seek to treat the loan as salary (especially if the "loans" are taken out weekly/monthly) and whack you with a big PAYE/NI bill. Read all about director's loans here: HM Revenue & Customs: Directors' loan accounts and Corporation Tax explained

Ask your accountant for advice, though they will probably tell you not to do it because people have a habit of clearing out the company's bank account, spending the money and then having none left when it comes to pay the tax man in a year or so, thus getting themselves in all manner of tulip and generally upsetting Hector.

I think that you have the million dollar answer

As long as I'm disciplined and don't spend the money, I should be fine.
Thanks

**escapeUK** · 5 April 2011, 06:19

I dont feel this question has ever been satisfactorily resolved.

We had several "you cant do that" opinions mostly from northernthing who has an opinion on most things he knows nothing about, and others who like to have £20k sat in company funds while paying interest on £20k on their mortgage.

We also had another guy say yes you can, you just need the proper documentation.

Contractor with offset mortgage