A quick financial question

[Max Turbo]

Hello all

Just a quick question...

My business is getting very close to the stage of being ready to be registered (Ltd) and start trading. I have a quick question about money/paying for things for the business etc.

When up and running, can I (as the director) make payments on my personal credit card (and obviously keep the receipts) and get my company to pay me when the credit card statement comes in?

I presume it works in the same way as a director's loan? The thing is, it will provide an additional buffer of credit, and I really dont see the point in applying for more credit when I have a perfectly suitable personal card ready to be used straight away without having to apply for any others.

Thoughts appreciated!

M

[jacobyte]

That's fine. Alternatively, if you'll be employed by the company, then you can claim for out of pocket expenses. Make sure you run them through the accounts and also on your personal self-assessment so that it all ties up.

[Eric Mc]

jacobyte said:

That's fine. Alternatively, if you'll be employed by the company, then you can claim for out of pocket expenses. Make sure you run them through the accounts and also on your personal self-assessment so that it all ties up.

Good advice.

Also, don't forget that, by law, these types of transactions must also be returned to the Revenue as part of the Employer's Annual Return disclosures on the form P11d.
If you are a Director of the company and you pay expenses or reimburse yourself expenses on the bases described - your company will need to register for PAYE - even if you don't intend to draw a salary.
I assume your limited company intends to register for PAYE?

Edited by Eric Mc on Wednesday 20th February 08:43

[Max Turbo]

Eric Mc said:

jacobyte said:

That's fine. Alternatively, if you'll be employed by the company, then you can claim for out of pocket expenses. Make sure you run them through the accounts and also on your personal self-assessment so that it all ties up.

Good advice.

Also, don't forget that, by law, these types of transactions must also be returned to the Revenue as part of the Employer's Annual Return disclosures on the form P11d.
If you are a Director of the company and you pay expenses or reimburse yourself expenses on the bases described - your company will need to register for PAYE - even if you don't intend to draw a salary.
I assume your limited company intends to register for PAYE?

Edited by Eric Mc on Wednesday 20th February 08:43

Thanks for both of the replies!

Eric, I know it might seem silly but I hadn't even thought about registering for PAYE as I was not expecting to take any profit in the early days of trading. Essentially I was going to cross that bridge when it came to it.

In essense, I am going to be running the business alongside me working my 9-5 job. For x number of months, I will be injecting cash into my business in the form of a Director's Loan. This loan will also include things that I put on my personal credit card, if possible.

Am I right in thinking that my company can pay back this loan to me without the company having to register for PAYE as it isn't technically a wage, its just repayment?

I then presume that when I want my company to start paying me a wage, that is the time that PAYE *has* to be set up by?

Sorry for all the questions and thank you for your ongoing support and advice! Your knowledge and the amount of time you give for free to us starting up really is priceless! Thanks!!!

Max

[Eric Mc]

Unfortunately, PAYE regulations cover more than just salary payments. The whole Expenses and Reimbursements area requires disclosure under the PAYE rules. This means that the only way these disclosure requirements can be met is for the company to register for PAYE.

Of course, the problem for the Revenue is that they do not know about such matters unless the company registers with them - so they can't really penalise anybody until the company actually fesses up.

However, last March, the Revenue issued 140,000 £900 penalty notices to limited companies which had failed to submit P35 (end of year returns) and P11ds (expenses and benefits returns) for 2006/07. Included in this blanket penalty blitz were many companies which weren't even registered for PAYE. This was a new and worrying tactic by the Revenue and we all wait to see if they will try a similar exercise this year.

So, EVERY company is vulnerable.

[jacobyte]

Max Turbo said:

Eric Mc said:

jacobyte said:

That's fine. Alternatively, if you'll be employed by the company, then you can claim for out of pocket expenses. Make sure you run them through the accounts and also on your personal self-assessment so that it all ties up.

Good advice.

Also, don't forget that, by law, these types of transactions must also be returned to the Revenue as part of the Employer's Annual Return disclosures on the form P11d.
If you are a Director of the company and you pay expenses or reimburse yourself expenses on the bases described - your company will need to register for PAYE - even if you don't intend to draw a salary.
I assume your limited company intends to register for PAYE?

Edited by Eric Mc on Wednesday 20th February 08:43

Thanks for both of the replies!

Eric, I know it might seem silly but I hadn't even thought about registering for PAYE as I was not expecting to take any profit in the early days of trading. Essentially I was going to cross that bridge when it came to it.

In essense, I am going to be running the business alongside me working my 9-5 job. For x number of months, I will be injecting cash into my business in the form of a Director's Loan. This loan will also include things that I put on my personal credit card, if possible.

Am I right in thinking that my company can pay back this loan to me without the company having to register for PAYE as it isn't technically a wage, its just repayment?

I then presume that when I want my company to start paying me a wage, that is the time that PAYE *has* to be set up by?

Sorry for all the questions and thank you for your ongoing support and advice! Your knowledge and the amount of time you give for free to us starting up really is priceless! Thanks!!!

Max

Eric's advice is always good quality - take heed!

Bear in mind that alongside your 9-5 job, if you are starting a company and putting your own money into it, gt rigustered as a sole trader. Then you can offst those costs in your annual self assessment without having to do the PAYE thing.

Eric, please cnfirm, as my double-casked Balvennie might be getting hte better of me!

[Eric Mc]

Unfortunately, if your second occupation is being run through a company, then any losses the company incurs are totally separate from you as an individual - and you cannot make use of such losses against personal income and personal Income Tax. They are "company" losses and can only be offset against "company" other income or future "company" trading profits.

What's more, if you already have fully taxable income from a continuing employment, any salary (even fairly small amounts) drawn from the limited company will be subject to PAYE.

[Max Turbo]

Hello,

Right then, I now have it on my list of things to do to register for PAYE. I presume that it doesn't cost anything but its just the additional work of filling in yet more annual forms. I would prefer to urr on the side of caution, register for PAYE and deal with a couple of forms than even risk having a fine from HMRC come through the post.

WRT having my business along side my 9-5 job, I understand that I will not be able to offset my company losses against my regular income - never really expected to be able to do this. Once my business is self sustaining, and I have paid back my Director's Loan, the company will be in a steady enough state for me to consider going full time, and for me to leave the regular job. Once this is the case, I will pay myself a wage (through PAYE) and it should be plain sailing from there!

Have I got any of that wildly wrong?!

Thanks for all of the advice guys!

M

[smartie]

does it have to be a ltd co or could you trade as a sole trader? What are your reasons for choosing a company?

A sole trader would make like much simpler re accounts, PAYE, red tape generally etc and could be tax advantageous if you are making low/no profit.

[Eric Mc]

Max - your basic assumptions are correct although Smartie's points about using a sole-tradership rather than a limited company are worth bearing in mind.

[Max Turbo]

smartie said:

does it have to be a ltd co or could you trade as a sole trader? What are your reasons for choosing a company?

A sole trader would make like much simpler re accounts, PAYE, red tape generally etc and could be tax advantageous if you are making low/no profit.

I am planning on launching a web based business that will be marketed at a large number of people, as opposed to a shop which will have a comparitivly small number of potential customers. The main competitor has got the market share at the moment and is Ltd. I wish to give my company as much credibility as possible in order to compete in the market.

Whilst the area of business I am getting into is 100% completely legitimate in every way, I would say there is a slightly higher than average risk of liability and this is the main reason I wish to go Ltd, in order to remove this risk from me personally. I understand that it would be significantly less work if I was going the sole trader route but I feel that it is probably for the best if I go Ltd from the outset rather than have to switch across at a later date.

Many thanks

M