Reply to: Alternative Company Saving Account

[THEPUMA]

I'm sure someone came up with a method using a deed of trust that allowed company money to be placed in a personal account (my memory seems to recollect it being connected to an offset mortgage).

The reason for doing so was not the amount of interest being paid but the additional security that was available from doing so.

It probably only works with an offset mortgage.

That was me (I think). It also works with deposit accounts. Whether or not the insitution would allow this if they knew about it is a different matter.

So if the company chooses to deposit its cash in an individual deposit account in order to maximise its income (and consequently corporation tax) there is no issue with this, provided the appropriate documentation is put in place.

Conceptually, there is a difference between a director's loan, where you can do what you like with the money and this arrangement where the cash just sits in the personal bank account and can't be touched.

PUMA

[Sergeant Murphys Cosh]

A Fourth Option

Let me get this straight: I have 150k sitting there earning zero interest I can:

a) lend myself lots of money?
b) Find a business bank account that pays a decent rate: Do these exist?
c) Lend myself the money and not tell anyone.

How about opening multiple business accounts, but in different currencies. Then, play the Forex market between the different accounts.

[moorfield]

Sounds feasible as per the other postings but is it worth the hassle for a few extra £s interest ? Just make sure you don't mix up between company and personal accounts, as Mr HMRC doesn't really go for this.

WHS. Do a back-of-the envelope calculation first, if you're not making more than several hundred quid saving then personally I wouldn't bother.

[eek]

I'm sure someone came up with a method using a deed of trust that allowed company money to be placed in a personal account (my memory seems to recollect it being connected to an offset mortgage).

The reason for doing so was not the amount of interest being paid but the additional security that was available from doing so.

It probably only works with an offset mortgage.

[chavvy]

Let me get this straight: I have 150k sitting there earning zero interest I can:

a) lend myself lots of money (I can do what I like with this money), but I will have to pay 4.75%. Who will I pay this interest to? my Ltd company? if so this profit will then get taxed at (e.g.) 30% and I am just paying 4.75*.3=1.425% to the IR. Have I got this right?

b) Find a business bank account that pays a decent rate: Do these exist?

c) Lend myself the money and not tell anyone. If I get caught refer to a) for what I owe. Not sure if my accountant would be happy with this though.

If my current contract pans out, I could be adding to my war chest for years and getting zero interest, I could end up with £250k and with inflation running at 5% thats a significant year on year devaluation of its actual worth. It doesn't seem right that a company can't earn interest on its capital.

[Support Monkey]

Arghhhhhh....... I said over 5K in my first post!

Are you drinking?

Arghhhhhh....... the directors loan is no longer company money, this was my point, the way you said it sounded like you where advising transfering all your cash to a personal account, its not illegal to transfer a director loan to a personal bank account because when it is loaned it is your money until you pay it back the same as any other loan.

Glad you all sorted that out, thankfully it was the Chardonnay talking

[MarillionFan]

Arghhhhhh....... I said over 5K in my first post!

Are you drinking?

Sorry. Yes. Chardonnay

[Olly]

Arghhhhhh....... I said over 5K in my first post!

Are you drinking?

[MarillionFan]

Um nope, not at all
I'd like to understand though, always on the look out to eek a few more dollars from the Ltd setup.

I've been advised by at least 2 accountants that directors loans over 5K should incur interest at the HMRC rate. Worse than that, any interest you do pay to your Ltd of course attracts corporation tax. I can't for the life of me think of a way to bend that seemingly hard and fast rule and be personally better off.

Sorry I wasnt clear. We're not talking a huge amount of cash here. Of course you would have to pay corporation tax. I have always had directors loans of 5k at 0%. My wife is also a director.

Then anything over is back into the business and appears as profit and then taxed accordingly(or helps to pay the accountant!)

The questions was, where is the best interest at the moment. And the answer is an A&L personal account at 2.75%. If you have a business account paying 0.1%, then you would be automatically better off to move the money about.

With interest rates so low it's nominal, but a few years ago at 5/6% it was worth quite a bit.

[Olly]

What I am saying is, you can put the money into a personal interest account. Then your accountant can decide where you pay the interest. Either directors or against the LTD depending on the amount/interest etc.

Is that clear now?

Um nope, not at all
I'd like to understand though, always on the look out to eek a few more dollars from the Ltd setup.

I've been advised by at least 2 accountants that directors loans over 5K should incur interest at the HMRC rate. Worse than that, any interest you do pay to your Ltd of course attracts corporation tax. I can't for the life of me think of a way to bend that seemingly hard and fast rule and be personally better off.

[MarillionFan]

You're right I don't get it...

So you take a director's loan which you're supposed to pay interest on.
Is that right so far?

Except you don't pay interest on it
Am I still understanding it correctly?

My accountants are a bit crap you're right. But it seems unlikely they'd have got this one so wrong.

What I am saying is, you can put the money into a personal interest account. Then your accountant can decide where you pay the interest. Either directors or against the LTD depending on the amount/interest etc.

Is that clear now?

[Olly]

You're right I don't get it...

So you take a director's loan which you're supposed to pay interest on.
Is that right so far?

Except you don't pay interest on it
Am I still understanding it correctly?

My accountants are a bit crap you're right. But it seems unlikely they'd have got this one so wrong.

[MarillionFan]

but the recognised HMRC rate you should be paying on the loan is higher than any bank account i know of....
Yes, of course you can break the law and just cough up when/if you get caught.
I don't think it's particularly unreasonable that many of us prefer to run our businesses legally.

Again. I don't think you're getting it. Your loss, nothing illegal. Thats why I have an accountant. Sounds like yours aint that good.

Take care.

MF

[Olly]

but the recognised HMRC rate you should be paying on the loan is higher than any bank account i know of....
Yes, of course you can break the law and just cough up when/if you get caught.
I don't think it's particularly unreasonable that many of us prefer to run our businesses legally.

[MarillionFan]

yes but if its over 5k then you must pay interest on it to your Ltd
Trust me. You've been lucky not to get caught in 13 years

Which is my point above. It is not illegal to move the money into a personal account to earn interest on it. My accountant splits the interest and sorts it out.Nothing lucky about it.

It's the bank that decides on the interest rates you get, nothing to do with HMRC.

The other thing I do is use a cashback card for everything I use. It's a personal card with 1%. For me I spend about 50K a year on a CC. So it's useful.

To be honest, far to many people scared around the whole HMRC thing. At the end of the day if you make a mistake and if you get a pull(I never have and I dont know any contractor who has) then you would only pay what you owe plus a percentage.

Far too many people scared into 'doing it right' IMHO.