Buying Crypto from Limited Company Account

[HKM]

Hi All,

Need your expert views:

I am a contractor and have limited company. I invested significant money in following manner from business bank account and want to know how it will be treated.

1) Invested around £15K directly from business bank account into Crypto account
2) Invested around £35K through business credit card (card limit was £8K but when the limited was reached I paid to credit card company from personal account and then reuse the credit limit to directly buy the crypto from business credit card
3) I took around £80K as director loan and transfer this money into my personal account and then invested this money in crypto accounts over a period of few months

The Crypto account is in my name but both my personal debit and credit and business debit and credit cards have been used to fund this account.

The Crypto value has declined significantly to the extent that it has lost more than 70% of the value. This in future may become zero or I may break even or I may make profit.

My intention was that this investment is business investment and any profit or loss will be business's profit and loss. What I want to know from you all is:

- Is it allowed to invest in Crypto using business bank account
- Will 1 be considered as business investment
- Will 2 be considered as business investment
- Will 3 be considered as business investment despite of I first transferred the money into personal account and then invested?

I would really appreciate expert opinions as this will help me appropriate treatment of the money invested in Crypto.


Regards

[cojak]

The real question do you have enough money in your bank account to pay your corporation tax?

[HKM]

Hi Cojak's,

Let's assume two scenario:

Scenario 1: Yes I do have enough money and can pay corporation tax

Scenario 2: No, I don't have enough money and the money I used is money borrowed on business credit card and money borrowed through business loan. Yes it wasn't the spare money I invested in crypto rather borrowed money. Yes I still have money to pay corporation tax for previous year which is due in 1.5 month

I know scernario 2 is complex scenario.

Will the treatment be different in any of the scenario and why?

Regards

[cojak]

Forget about the method of investment, it’s just investment to the tax man. HMRC just wants its tax when it’s due.

They don’t give a diddlysquat about your risk, pay up when they want you to pay up.

It’s that simple.

Other legalities may apply, but others will give you that advice.

[northernladuk]

Wow what a mess. Have you been speaking to your accountant about any of this?

I'm not an accountant but I think...

1) Invested around £15K directly from business bank account into Crypto account

Business investment

2) Invested around £35K through business credit card (card limit was £8K but when the limited was reached I paid to credit card company from personal account and then reuse the credit limit to directly buy the crypto from business credit card

So you loaned the company money to allow you to buy more from the business account? Only the business card was used to buy the crypto? If so then business investment.
You need to account for the loan to the business properly through your DLA

3) I took around £80K as director loan and transfer this money into my personal account and then invested this money in crypto accounts over a period of few months

If you can't work this out then you shouldn't really be messing with highly volatile investments. The money was loaned to you to personally buy something. It's purely personal.
You have to account for the loan properly including paying a reasonable interest rate and deal with the S455 tax properly. That's going to be one hell of a charge.

S.455 is charged at 32.5% of the outstanding loan or loans amount.

For an example, you borrowed £30,000 from your company in June 2017. Your company end-of-year is 31st March 2018. That means that you have nine months after 31st March to pay back the £30,000 – that is, 31st January 2019.

But what if you couldn’t repay any of the £30,000? You’d have to enter 32.5% of that onto the S.455 section of your CT600 corporation tax return. So, your corporation tax bill would rise by £9,750.

If you paid your overdrawn directors’ loan account down by £10,000 leaving the balance at £20,000, your company would have to pay 32.5% of that £20,000 in S.455 corporation tax.

Ouch.

[northernladuk]

Hi Cojak's,

Let's assume two scenario:

Scenario 1: Yes I do have enough money and can pay corporation tax

Scenario 2: No, I don't have enough money and the money I used is money borrowed on business credit card and money borrowed through business loan. Yes it wasn't the spare money I invested in crypto rather borrowed money. Yes I still have money to pay corporation tax for previous year which is due in 1.5 month

I know scernario 2 is complex scenario.

Will the treatment be different in any of the scenario and why?

Regards

Does either scenario take in to account handling the loans, repayment, interest and s455?

Bearing in mind you've lost 70% of this you've still got a lot of money to pay. I'd assume you are in bit of a pickle so it's time to have a long sit down with your accountant.

Remember this is contracting forum so you are asking other contractors about complex tax sitautions. We have the odd helpful accountant on here but they can only give limited advice and it's free so worth every penny you pay for it. Accountingweb might have been a better place to ask...but your accountant is the person you need to speak with right now.

[northernladuk]

Just out of interest, have you been following the crypto thread in General?

[HKM]

Just out of interest, have you been following the crypto thread in General?

Hi northernladuk,

i created my account here today so no I haven't been been following the other thread. I assumed my situation is complex one so no one would have faced it either anyways.

It's great that scenario 1 and 2 will be considered as business investments

Is there any ways scenario 3 can also be considered business investment? that's how I invested most money in crypto :-(

Yes I have considered the worse case scenario i.e. if scenario 3 will be considered as personal investment then I will have to pay 80K back to my company. my year end is Dec which means I have until Sep 2019 to do this. I will offset around £45K from 2019 dividend, salary and expenses and any remaining money from my personal account (I don't have any money in personal account to pay this however, if crypto goes up or break even I can then take some money out to pay it back to my company account or in worse case I will take personal loans to pay it back to company in Sep 2019 and then take another Director loan on 1st Jan 2020 to pay my personal loan back).

So effectively I am not thinking about paying 40% money to HMRC post Sep 2019 rather I am intending to pay it back to company before Sep 2019. Not an idle situation but that's how I will manage my risks.

So the real question is whether scenario 3 can be considered as business investment by any legitimate ways?

[northernladuk]

No.

[HKM]

No.

I thought so..just wanted someone to prove myself wrong..

May be when it breaks even I sell it and take the money out and put this money back in business account...and then invest it back in crypto..

That will be the simplest solution...but this is subject to crypto breaking even!!

on a different note, I am all in on XRP...are you in Crypto :-) if so...will I see my money back..

many thanks