Directors Loan and Company Expenses

[zedmartin]

I wonder if anyone can help me, as I've come to be a little bit suspicious of the accountants I use.....
I have a Director's Loan balance of £10k. Myco year end is 30 Nov, and I have stopped trading as I have become an employee of another company. I have just submitted £5150 worth of expenses that I paid for personally and which are wholly allowable as business expenses according to HMRC (its professional membership dues without which I wouldn't have been in business). My accountants tell me that the Directors Loan account will only reduce by £1030 being 20% corp tax equivalent on the expense amount. Is this right? I thought that wholly allowable expenses meant that the company paid them for me, as an employee/director? Someone please help.....

[Craig at Nixon Williams]

Given you have paid the expenses personally, the director's loan should reduce by £5,150. The Corporation Tax liability should reduce by the £1,030.

Hope this helps!
Craig

[Andrew@Wisteria]

Given you have paid the expenses personally, the director's loan should reduce by £5,150. The Corporation Tax liability should reduce by the £1,030.

Hope this helps!
Craig

Agree with Craig. Sounds somewhat odd what you have been told.

[zedmartin]

Thanks people. I have challenged my accountants and told them that the expenses paid for by me (they had to be paid in my name ather than the company name) are to come off 100% on my balance sheet. The corp tax 20% relief is a P&L account matter and therefore I am entitled to reclaim the expenses 100%. They sounded like they believed me, which is worrying given that they are the accountants, and should know this already. I have given them until the end of the day to sort this out, otherwise I will issue a letter of disengagement. I'll update you and let you know what the outcome is....watch this space!

[zedmartin]

My accountants are driving me mad! They have reworked the last few invoices to show that the expenses I paid essentially count as drawings, so for example my last remittance advice was £1000 (dividends and salary), the expense adjustment of £700 shows I am still to receive £150 (these figures are approximate). Therefore they are only reducing the Directors Loan by £1030, rather than the £5150 expenses. I don't understand this, as to me it's fairly simple. I am entitled to dividends and salary and repayment of 100% expenses I outlay for the company. Anybody got any ideas why they are doing it this way?

[DirtyDog]

My accountants are driving me mad! They have reworked the last few invoices to show that the expenses I paid essentially count as drawings, so for example my last remittance advice was £1000 (dividends and salary), the expense adjustment of £700 shows I am still to receive £150 (these figures are approximate). Therefore they are only reducing the Directors Loan by £1030, rather than the £5150 expenses. I don't understand this, as to me it's fairly simple. I am entitled to dividends and salary and repayment of 100% expenses I outlay for the company. Anybody got any ideas why they are doing it this way?

I don't like the idea of having a monthly dividend payment as a starter - looks too much like salary to me, but that's beside the point.

How can they have reworked invoices - surely you invoice the client for services / goods / expenses (any combination of one, two or three of those), and they get paid. If your accountant is fiddling with invoices, then I'd be very worried.

As far as the dividends go, what does the paperwork show? When you had the shareholders meeting to decide what dividend to pay, what figure did you use? What does the voucher show was declared as the dividend?

This all sounds messy to me. Explain again to the accountants that the £5000+ in expenses reimbursed hasn't been paid to the employee by the company, and is instead offset against the directors loan account. If they cannot grasp this fairly simple premise, then fire them and find someone to clear up the mess.

[northernladuk]

I don't like the idea of having a monthly dividend payment as a starter - looks too much like salary to me, but that's beside the point.

I can see where you come from but you have to be pragmatic. They are completely different things and as long as the divi paperwork is signed on time there is absolutely no similarity. What I don't understand though is why people only pay themselves divis monthly when there is money in the company. Divi out the yearly allowance as fast as possible and put it somewhere the money can work for you and draw down from that. Why leave it in an accountant paying zero interest for the sake of doing it monthly. I can't get my head around why people do this at all.

This all sounds messy to me. Explain again to the accountants that the £5000+ in expenses reimbursed hasn't been paid to the employee by the company, and is instead offset against the directors loan account. If they cannot grasp this fairly simple premise, then fire them and find someone to clear up the mess.

^^ This

[DirtyDog]

Why leave it in an accountant paying zero interest for the sake of doing it monthly.

I'd never leave it in an accountant.

[DirtyDog]

I can see where you come from but you have to be pragmatic. They are completely different things and as long as the divi paperwork is signed on time there is absolutely no similarity.

Reading this thread, do you want to bet that the paperwork was signed at the time and is correct?

[Craig at Nixon Williams]

*Insert Darren Upton joke here*