Cashing a Cheque from my limited company to myself, is it allowed?

[Danielsjdaccountancy]

There's no money in the account. He's wanting to cash a cheque on the assumption that the funds will hit his bank before the cheque hits.

Yep, understand that, I'm referring to what he could offset this money as, i.e. stopping any director loan charges.

[Jeremiah@RHJAccountants]

Using a credit card or a payday loan seems the best option to me if there is no money in the account, and then when the invoices are paid you can pay off the loan or credit.

taking out a director's loan is perfectly legal and it has already been mentioned about the interest due if it is over £5,000.

can you not borrow the cash you need from a family member or friend ?

[Alan @ BroomeAffinity]

Have you incurred any start up expenditure? You could make the cheque out for that amount, this way not getting into Directors Loan territory or running the risk of eating HMRC money?

There's no money in the account. He's wanting to cash a cheque on the assumption that the funds will hit his bank before the cheque hits.

[Danielsjdaccountancy]

Hi, I'm new to this whole thing so just wanted some advice to make sure i don't do anything illegal.
I'm the director and owner as well as an employee of my limited company. I've got invoices due to be paid into my business account next week but am in need of urgent cash now. Am i allowed to write a cheque from my business to myself, as wages, and go and cash this at a cheque cashing company?

I'm not trying to do anything illegal here, just a short term cashflow problem. My credit rating has not been good since university so the bank will not give me an overdraft or anything.
Your responses will be greatly appreciated.

Have you incurred any start up expenditure? You could make the cheque out for that amount, this way not getting into Directors Loan territory or running the risk of eating HMRC money?

[Alan @ BroomeAffinity]

wonga.com or suchlike. The cheque-cashing place you were thinking of using will most likely offer a payday loan as an alternative.

[jmo21]

Surely there's some legal obligation behind cashing a cheque you know is going to bounce.....?

that's why I told him to use a credit card.

[northernladuk]

I assumed he had no money in the account to pay a directors loan yet.

Yes you are right. I didn't think he was that daft to be honest. More the fool me

[northernladuk]

Surely there's some legal obligation behind cashing a cheque you know is going to bounce.....?

See if you can spot it..

Types of cheque fraud
Cheque kiting
Main article: Check kiting
Check kiting refers to use of the float to take advantage and delay the notice of non-existent funds.

Embezzlement
While some cheque kiters fully intend to bring their accounts into good standing, others, often known as paper hangers, have pure fraud in mind, attempting to "take the money and run."

Bad cheque writing
Main article: Non-sufficient funds
A cheque is written to a merchant or other recipient, hoping the recipient will not suspect that the cheque will not clear. The buyer will then take possession of the cash, goods, or services purchased with the cheque, and will hope the recipient will not take action or will do so in vain.

Abandonment
The paper hanger deposits a cheque one time that s/he knows is bad or fictitious into his/her account. When the bank considers the funds available (usually on the next business day), but before the bank is informed the cheque is bad, the paper hanger then withdraws the funds in cash. The offender knows the cheque will bounce, and the resulting account will be in debt, but the offender will abandon the account and take the cash.

Such crimes are often used by petty criminals to obtain funds through a quick embezzlement, and are frequently conducted using a fictitious or stolen identity in order to hide that of the real offender.

[stek]

It's wrong to spend money that belongs to the Tax man, so be sure the money isn't VAT/CT/PAYE.....

[Clare@InTouch]

I assumed he had no money in the account to pay a directors loan yet.

Surely there's some legal obligation behind cashing a cheque you know is going to bounce.....?

[Clare@InTouch]

Writing a cheque to yourself and cashing it is in effect simply a directors loan. Yes it's legal, but there can be tax consequences:

Any loan over £5,000 will be a benefit in kind, and you’ll pay tax on the deemed value of any interest you’ve saved by not going to a bank. Keep in mind this is the total value of money you owe the company, so if you take a loan of £5,000 and then overpay your wages by £2 then the loan is £5,002 and becomes taxable.

Any loans outstanding at the balance sheet date (company year end) have to be disclosed in the accounts and on the company tax return. If they are not repaid within 9 months of the year end then the company will pay extra Corporation Tax of 25% of the loan value (known as Section 455 tax). This extra 25% is repaid to the company by HMRC when you repay the loan to the company. You should avoid repaying a loan and then taking it out again soon after as it’s an obvious avoidance tactic HMRC call bed & breakfasting. They will see through it and tax it as if it had never been repaid. If loans are outstanding this will also delay us filing the accounts until they are either paid, or you agree the extra tax charge.

In short, you can do it but it should be seen as short term option. Go careful you don't get yourself in a mess by taking out money that you should have set aside for tax.

If you search the forum for Directors Loan you'll find a lot of views on the subject.

[jmo21]

Jesus, cashing company cheques for wages not worked yet.. F that for a game of soldiers legal or not.

You are allowed to take a directors loan of up to 5k a year tax free that has some caveats around paying it back in certain timeframes etc. Use that instead.

Better still get an accountant and take his advice. Looking to the company to fill shortfalls in your personal issues is a very very dangersous place to be.. Ask Darren Upton.

I assumed he had no money in the account to pay a directors loan yet.

[northernladuk]

Jesus, cashing company cheques for wages not worked yet.. F that for a game of soldiers legal or not.

You are allowed to take a directors loan of up to 5k a year tax free that has some caveats around paying it back in certain timeframes etc. Use that instead.

Better still get an accountant and take his advice. Looking to the company to fill shortfalls in your personal issues is a very very dangersous place to be.. Ask Darren Upton.

EDIT : Misread the first post. You have no money in the business yet to even use a directors loan?? Is that right? If so then what JMO21 said then, get a credit card. Do not start buggering about with loans using your LTD. Keep your business and your LTD's business completely separate.

[jmo21]

Tin hat on, but wouldn't it be easier to stick whatever it is on a credit card and pay it off as soon as you get the invoices paid, and pay yourself salary/divvies?

I'll spare you the usual "why don't you have a warchest as a new contractor" patter.

Edit: just re-read and saw the "overdraft or anything" comment, doh!

[londoncontractor]

Hi, I'm new to this whole thing so just wanted some advice to make sure i don't do anything illegal.
I'm the director and owner as well as an employee of my limited company. I've got invoices due to be paid into my business account next week but am in need of urgent cash now. Am i allowed to write a cheque from my business to myself, as wages, and go and cash this at a cheque cashing company?

I'm not trying to do anything illegal here, just a short term cashflow problem. My credit rating has not been good since university so the bank will not give me an overdraft or anything.
Your responses will be greatly appreciated.