quick question - taking money out of a ltd company
Discussion
my accountant ison holiday at the moment and have a quick question about taking money out of a ltd company.
i need to effectively borrow a couple of grand from my company. can i just transfer the money to myself and pay it back interest free say in a month or so or would i need to turn this into a dividend payment and then just record it and tell my accountant to sort it out at year end? sorry all new to this having only been going 2 months!
i need to effectively borrow a couple of grand from my company. can i just transfer the money to myself and pay it back interest free say in a month or so or would i need to turn this into a dividend payment and then just record it and tell my accountant to sort it out at year end? sorry all new to this having only been going 2 months!
paul001 said:
my accountant ison holiday at the moment and have a quick question about taking money out of a ltd company.
i need to effectively borrow a couple of grand from my company. can i just transfer the money to myself and pay it back interest free say in a month or so or would i need to turn this into a dividend payment and then just record it and tell my accountant to sort it out at year end? sorry all new to this having only been going 2 months!
I'm sure Eric will be along shortly to confirm but as far as I'm aware you can't borrow money on an 'interest free' basisi need to effectively borrow a couple of grand from my company. can i just transfer the money to myself and pay it back interest free say in a month or so or would i need to turn this into a dividend payment and then just record it and tell my accountant to sort it out at year end? sorry all new to this having only been going 2 months!
You could suggest that in the first instance take it out of your Directors Loan which will go into a negative balance, pay a small amount of interest. Then on 5th April declare a dividend to the same amount (thus keeping the money), pay the Directors Loan back and then you won't have to pay tax on the drawings until January 2010.
Just a thought
Edited by mogul on Wednesday 12th March 20:56
Strictly speaking, taking money from youir company without accounting for tax on the amount drawn is illegal under company law.
Loans by companies to directors contravene Section 419 of the Corporation Tax rules as well.
However, the declaration process for these types of loans is limited to declaring the balance drawn at either 5 April (for tax Benefit in Kind purpooses) or declaring the amount outstanding at the year end date of the company in the company's statutory accounts.
BIK tax is only due if:
the loan was made interest free or at interest rates lower than the bank base rate
the balance at 5 April was over £5,000
ALL "overdrawn" director's loans are declarable in the accounts
However, if a director has borrowed money from his company during the year and has repaid it by the end of the accounting or tax year (or cleared it through the a salary bonus or dividend declaration) - then there will be no tax or company law problems.
Loans by companies to directors contravene Section 419 of the Corporation Tax rules as well.
However, the declaration process for these types of loans is limited to declaring the balance drawn at either 5 April (for tax Benefit in Kind purpooses) or declaring the amount outstanding at the year end date of the company in the company's statutory accounts.
BIK tax is only due if:
the loan was made interest free or at interest rates lower than the bank base rate
the balance at 5 April was over £5,000
ALL "overdrawn" director's loans are declarable in the accounts
However, if a director has borrowed money from his company during the year and has repaid it by the end of the accounting or tax year (or cleared it through the a salary bonus or dividend declaration) - then there will be no tax or company law problems.
Eric Mc said:
You just have to be careful to ensure that the necessary dividend paperwork is generated. The Revenue can ask to see dividend vouchers and minutes od directos' meetings proposing dividends as evidence that dividends were genuinely paid.
Done and signed.I also take dividends monthly and sign paperwork in advance.
Sorry - it's not as simple as that. You need to know the state of affairs of your company before you draw any money out.
If excess dividends are drawn and the accountant does not find out until after the year end, it could already be too late for action to remedy the situation to be taken - and you could find yourself with an expensive and unwanted penal Section 419 Corporation Tax liability.
Talk to your accountant by all means - but do it BEFORE you make the withdrawl, not after.
If excess dividends are drawn and the accountant does not find out until after the year end, it could already be too late for action to remedy the situation to be taken - and you could find yourself with an expensive and unwanted penal Section 419 Corporation Tax liability.
Talk to your accountant by all means - but do it BEFORE you make the withdrawl, not after.
That is not always a sensible thing to do.
The accountant will deal with it - but it's you that might have to pay the Section 419 tax - or sign the accounts disclosing an illegal loan to the director - and /or pay the Benefit in Kind tax on the interest free borrowings.
It's best to check with your accountant BEFORE you take the money out - just so that you are fully aware of the ramifications.
The accountant will deal with it - but it's you that might have to pay the Section 419 tax - or sign the accounts disclosing an illegal loan to the director - and /or pay the Benefit in Kind tax on the interest free borrowings.
It's best to check with your accountant BEFORE you take the money out - just so that you are fully aware of the ramifications.
Gassing Station | Business | Top of Page | What's New | My Stuff