Using a personal debit card for a business transaction?
Discussion
Good afternoon,
I have very recently set up a private limited company. I am not trading, just developing a potential product. I'm exploring business bank accounts but don't yet have one. There is no money in the business yet, and I don't yet have an accountant to ask, although I am considering it.
I have a (time limited) opportunity to purchase a design as part of a licensing agreement, which requires a one-time fee.
I appreciate that I have a responsibility to keep my personal and business finances separate, so is it unreasonable to use my personal debit account to make this payment in the name of the business, as long as it is all carefully and properly recorded and invoiced? I expect I would record the payment as a directors loan and process it as an expense?
I don't intend to make a habit of this - very much a one off, but without yet having a business bank account are there any significant pitfalls with this plan?
I do also appreciate that I will require this kind of knowledge (either myself or via an accountant) to operate lawfully, and whilst I fully intend to gain such knowledge, this opportunity has presented itself before I've had a chance to do so.
Thanks.
I have very recently set up a private limited company. I am not trading, just developing a potential product. I'm exploring business bank accounts but don't yet have one. There is no money in the business yet, and I don't yet have an accountant to ask, although I am considering it.
I have a (time limited) opportunity to purchase a design as part of a licensing agreement, which requires a one-time fee.
I appreciate that I have a responsibility to keep my personal and business finances separate, so is it unreasonable to use my personal debit account to make this payment in the name of the business, as long as it is all carefully and properly recorded and invoiced? I expect I would record the payment as a directors loan and process it as an expense?
I don't intend to make a habit of this - very much a one off, but without yet having a business bank account are there any significant pitfalls with this plan?
I do also appreciate that I will require this kind of knowledge (either myself or via an accountant) to operate lawfully, and whilst I fully intend to gain such knowledge, this opportunity has presented itself before I've had a chance to do so.
Thanks.
"Capital Introduced" is a term that tends to be more used when the business is run through a sole tradership or partnership.
If a director of a limited company uses his own personal resources (personal bank account, personal credit card etc) to pay for legitimate business expenses. then he/she is effectively lending personal money to the company. He/she is therefore creating a "Director's Loan Account" and the company can pay back whatever he/she is owed when it has the resources to do so.
If a director of a limited company uses his own personal resources (personal bank account, personal credit card etc) to pay for legitimate business expenses. then he/she is effectively lending personal money to the company. He/she is therefore creating a "Director's Loan Account" and the company can pay back whatever he/she is owed when it has the resources to do so.
Simpo Two said:
'Capital introduced'?
If everything is recorded and declared as/when required, there's nothing dodgy.
Did you actually need the extra complexity and regulatory demands of a limited company?
I believe so. It's a custom made product, with a reasonably large minimum order quantity, and if after having placed the order the supplier went bust I would rather have the protections offered by an LTD. If everything is recorded and declared as/when required, there's nothing dodgy.
Did you actually need the extra complexity and regulatory demands of a limited company?
Eric Mc said:
"Capital Introduced" is a term that tends to be more used when the business is run through a sole tradership or partnership.
If a director of a limited company uses his own personal resources (personal bank account, personal credit card etc) to pay for legitimate business expenses. then he/she is effectively lending personal money to the company. He/she is therefore creating a "Director's Loan Account" and the company can pay back whatever he/she is owed when it has the resources to do so.
Thanks for the information. At a brief glance it seems that if I don't charge interest on my loan to the company then there are few significant tax implications etc. We have a standard articles of association so I'm sure it'll be permitted but I'll double check!If a director of a limited company uses his own personal resources (personal bank account, personal credit card etc) to pay for legitimate business expenses. then he/she is effectively lending personal money to the company. He/she is therefore creating a "Director's Loan Account" and the company can pay back whatever he/she is owed when it has the resources to do so.
Eric Mc said:
There is no rule (tax or otherwise) that says you have to charge interest to the company on any loans you make to the company.
I meant in the sense that if I did charge interest, I have to apply income tax to any interest repayments from the company, declare it via form CT61 and put it in my self assessment, whereas if I don't charge interest that can be avoided!As you say, you would have to declare it on your Self Assessment (and potentially pay 20% Income Tax on it - although there is an annual interest income allowance of £1,000). The company would be able to claim tax relief on it as a legitimate business expense. Corporation Tax is currently 19% although that is increasing to 25% on 1 April 2023.
So, there is a possible tax saving involved when all aspects are considered. But you have to weigh up against this the hassle factor.
So, there is a possible tax saving involved when all aspects are considered. But you have to weigh up against this the hassle factor.
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