Taking share dividend as good rather than cash VAT.
Taking share dividend as good rather than cash VAT.
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Discussion

AJL308

Original Poster:

6,390 posts

186 months

Wednesday 19th December 2018
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Hypothetical situation:

A VAT registered company makes a profit. Company pays it's corporation tax on said profits. The director who owns 100% of the shares decides to pay a share divided of £2K from the retained profit and credits his loan account accordingly.

Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.

Does the director reduce his loan account by £1,200 (leaving £800 still to draw) which is the full purchase price of the TV or can he reduce it by £1,000 (leaving £1k still to draw) which is the price of the TV which the company has incurred due to claiming it back?

PF62

4,065 posts

203 months

Wednesday 19th December 2018
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AJL308 said:
Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.
Rather pointless the company claiming the VAT as it will have to pay it back if it does.

Eric Mc

125,768 posts

295 months

Wednesday 19th December 2018
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Yes - the company has "sold" the TV to the director and needs to declare the sale and the relevant VAT.

TheRainMaker

7,886 posts

272 months

Wednesday 19th December 2018
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Can the company not just keep the TV as an asset?

PF62

4,065 posts

203 months

Wednesday 19th December 2018
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TheRainMaker said:
Can the company not just keep the TV as an asset?
Sure if it is in the company boardroom, but if it is in the director's home so they can watch Strictly...

TheRainMaker

7,886 posts

272 months

Wednesday 19th December 2018
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PF62 said:
TheRainMaker said:
Can the company not just keep the TV as an asset?
Sure if it is in the company boardroom, but if it is in the director's home so they can watch Strictly...
Not saying it's right, but who would ever know?

Nano2nd

3,426 posts

286 months

Wednesday 19th December 2018
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TheRainMaker said:
Not saying it's right, but who would ever know?
in reality no-one, but that goes for any crime... if you murder someone but don't get caught, then who would ever know? even the guy you murdered wouldn't really have much to say about it wink

PurpleMoonlight

22,362 posts

187 months

Thursday 20th December 2018
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AJL308 said:
Hypothetical situation:

A VAT registered company makes a profit. Company pays it's corporation tax on said profits. The director who owns 100% of the shares decides to pay a share divided of £2K from the retained profit and credits his loan account accordingly.

Director wants a new telly, sees one he likes for £1,200 so decides to draw on his loan account. The company buys the TV and claims the VAT on its purchase.

Does the director reduce his loan account by £1,200 (leaving £800 still to draw) which is the full purchase price of the TV or can he reduce it by £1,000 (leaving £1k still to draw) which is the price of the TV which the company has incurred due to claiming it back?
You don't claim the VAT. You just charge the whole cost to the DLA.

Eric Mc

125,768 posts

295 months

Thursday 20th December 2018
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That would be the simplest solution. Treat it as the company buying something for the director's personal use - and allocate the cost to the director's loan account.

jonamv8

3,288 posts

196 months

Thursday 20th December 2018
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What happens if tv is meant for boardroom, vat reclaimed and during install its dropped broken rendering it useless?

Company writes it off ?

Director takes it home fixes it and watches strictly ?

PurpleMoonlight

22,362 posts

187 months

Friday 21st December 2018
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Let's face it. Everybody including HMRC knows some items purchased by a business will end up in directors/employees possession. The effort in investigating it is just not worthwhile.

Strangely my accountant visited my office the other week for a joint client meeting. He had never visited before. He commented that he was pleased to actually see all the art on the walls and huge fish take I have purchased via the business.

Good job he didn't look for the 65" tv.

tongue out

Eric Mc

125,768 posts

295 months

Friday 21st December 2018
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jonamv8 said:
What happens if tv is meant for boardroom, vat reclaimed and during install its dropped broken rendering it useless?

Company writes it off ?

Director takes it home fixes it and watches strictly ?
If it is genuinely broken and scrapped/thrown out - there are no VAT issues.

If it is taken for personal use - the VAT needs to be repaid - end of story.

Julian Thompson

2,717 posts

268 months

Sunday 30th December 2018
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I’d like to add that it’s very easy to listen to the talk “down the pub” about how, in the event of HMRC coming for a look round, these big shots are “just going to say this, just going to say that” - but the reality based on my experience of three VAT inspections is that the HMRC staff are far from stupid and lots of these people come unstuck when put under pressure during an audit.

My interactions with the inspectors have all been positive experiences. Even the one where I wrote some software wrong that captured VAT incorrectly for 18 months which meant they owed me £60k back!

Would you want to risk spoiling the relationship between you and the tax inspector for the sake of a few pounds saved on some small office trinkets or whatever? I certainly wouldn’t - it’s normally pretty clear when you have made an error vs a deliberate attempt to steal the money that belongs to HMRC, and, again, I have always been offered excellent leniency for genuine errors with fully suspended/cancelled penalties for those inaccuracies that turn up. I feel sure that if we were not presenting a clean set of books that wouldn’t be the case.

Also, honestly, there is no benefit to confusing the issue by putting the TV through and the director gets better consumer rights by buying as an individual anyway. I’d say you’re overcomplicating stuff.