couple of questions..

[kobebryant]

I am just about to start my first IT contracting role tomorrow. Thanks to this site it has helped me get an understanding of many things but one thing left unknown to me is regarding expenses.

I will be working away and staying in a b&b for 4 nights a week. I Also have travel back and forth.

I am awaiting my business account to be set up (hopefully by tuesday) Is there a problem with using my own personal money to pay for the expenses I incurr? obviously I have no other option at the minute but once the business account is up and running. do i NEED to pay for hotels etc out of my business account? Or can i use my personal one to keep things more simple than doing a directors loan, which I have heard about. My problem is I will have to go 2 months without getting any money paid in.

Cheers for your time.

[malvolio]

They're called "expenses " for a reason you know...

You can pay for things out of your own pocket and reclaim them from YourCo when it has some money in it. Or you can get a company card and pay for things directly. The latter is simpler and more direct, but the overall impact on both the company accounts and your own (and the VAT treatment) is exactly the same.

For now, pay what you need to pay, keep all the receipts, and write your self an expense claim to provide an audit trail for the repayment.

Two things to get very clear in your head as a newbie to the trade - You and YourCo are totally different people legally, with their own money so don't mix them up, and if you make a profit from your expenses you''re doing something wrong - and potentially illegal.

[jmo21]

Yes, You can pay out of personal funds and claim back from your company once it has money.

No need to classify anything as a loan.

[thunderlizard]

Or can i use my personal one to keep things more simple than doing a directors loan, which I have heard about.

Malvolio's and jmo's way is absolutely fine. But the director's loan route is pretty simple too:

(1) You personally pay your company say £3000
(2) Your company pays for the B&B, travel etc. directly.
(3) Once your company has sufficient cash in the bank, it pays you back the £3000.

It really doesn't matter either way - it just depends on whether you want to see all the individual transactions happening in your caompany's account, or yours. For me, I'd do it using a director's loan.

NB Most of the talk on this forum is about using the director's loan in the other direction - the company lends you some money - don't get too distracted by that.

[malvolio]

Malvolio's and jmo's way is absolutely fine. But the director's loan route is pretty simple too:

(1) You personally pay your company say £3000
(2) Your company pays for the B&B, travel etc. directly.
(3) Once your company has sufficient cash in the bank, it pays you back the £3000.

It really doesn't matter either way - it just depends on whether you want to see all the individual transactions happening in your caompany's account, or yours. For me, I'd do it using a director's loan.

NB Most of the talk on this forum is about using the director's loan in the other direction - the company lends you some money - don't get too distracted by that.

And you account for the VAT where...?

Not everyone uses FRS. Not everyone can in their first quarter.

Stick to the simple, accountable route every time.

[thunderlizard]

The same was I normally would. Company pays supplier including VAT. Then it depends on the company's VAT status. You said yourself the VAT treatment is the same. And also that having the company pay is "simpler and more direct". You're a hard man to agree with!

[Sausage Surprise]

Malvolio's and jmo's way is absolutely fine. But the director's loan route is pretty simple too:

(1) You personally pay your company say £3000
(2) Your company pays for the B&B, travel etc. directly.
(3) Once your company has sufficient cash in the bank, it pays you back the £3000.

It really doesn't matter either way - it just depends on whether you want to see all the individual transactions happening in your caompany's account, or yours. For me, I'd do it using a director's loan.

NB Most of the talk on this forum is about using the director's loan in the other direction - the company lends you some money - don't get too distracted by that.

Nope...by correctly claiming expenses you also reduce your Corporation Tax.