Can I pay corporation tax with personal credit card?

[kryten22uk]

Thinking of using my credit card online to pay my corporation tax (dont ask, i'm a mileage junkie!).

Is this ok from an accounting perspective? i.e. do I reimburse myself as if it were an expense, but put the payment down as a tax payment instead?

[Eric Mc]

You can always pay a company debt from your own personal resources. You are effectively lending money to the company which, when the company can afford it, it will repay to you later - tax free, of course.

[kryten22uk]

Ok thanks. Presumably I have to mark it down as CorpTax rather than a normal expense?

[srebbe64]

Corp Tax payments are not Tax deductible! (If only!)

[Eric Mc]

Corporation Tax is a deduction against your profits, but, as Srebbe rightly points out, it is not allowable for tax purposes. Therefore, the payment should be posted to the Corporation Tax profit and loss account heading.

If your accountant has already provided for this Corporation Tax charge in last year's accounts (I presume the liability is in respect of the previos year's profits), there might be a brought forward Corporation Tax liability showing in the balance sheet. If that is the case, then the payment goes against this balance rather than the profit and loss account.

You intend to pay this tax bill personally. Therfore, there will be no payment coming out of the business bank acount. Therefore, the "payment" will need to be accounted for by a jourmnal.

The journal entry is -

Debit the CT heading in the Profit and Loss account (or the CT liability b/fwd from last year if it exists)

Credit the Director's Current/Loan Account

[siscar]

I think he just wants to pay it on his personal credit card to get the airmiles. So pay the corporation tax on the card then reimburse himself with a cheque/transfer from the company.

[Eric Mc]

Fair enough.

In theory the Revenue could claim he was deriving a Benefit in Kind (the airrmiles) from his company but the argument wwould be very tenuous, in my opinion.

[kryten22uk]

siscar said:

I think he just wants to pay it on his personal credit card to get the airmiles. So pay the corporation tax on the card then reimburse himself with a cheque/transfer from the company.

Eric Mc said:

Fair enough.

In theory the Revenue could claim he was deriving a Benefit in Kind (the airrmiles) from his company but the argument wwould be very tenuous, in my opinion.

Yes, I just want to pay on personal card to get airmiles. But didnt know how to record the fact that the subsequent bank transfer from my business account to my personal account is not a director withdrawal, but a reimbursement for having paid the corptax.

I have a code on my accounting software for CorpTax, so I'll just log the payment from business->personal under this code, in the same way as I would had I just done a bank transfer to HMRC acct.

Then i'll get on the phone to BA and book my First class flights!

[Brown and Boris]

Never thought about doing this!

What else can I get?

[kryten22uk]

Brown and Boris said:

Never thought about doing this!
What else can I get?

What do you mean? Most credit cards have loyalty schemes, be it frequent flyer/stayer points or cashback. I does however cost you 0.91% credit card fee though. So make sure its worth it.

[Eric Mc]

kryten22uk said:

siscar said:

I think he just wants to pay it on his personal credit card to get the airmiles. So pay the corporation tax on the card then reimburse himself with a cheque/transfer from the company.

Eric Mc said:

Fair enough.

In theory the Revenue could claim he was deriving a Benefit in Kind (the airrmiles) from his company but the argument wwould be very tenuous, in my opinion.

Yes, I just want to pay on personal card to get airmiles. But didnt know how to record the fact that the subsequent bank transfer from my business account to my personal account is not a director withdrawal, but a reimbursement for having paid the corptax.

I have a code on my accounting software for CorpTax, so I'll just log the payment from business->personal under this code, in the same way as I would had I just done a bank transfer to HMRC acct.

Then i'll get on the phone to BA and book my First class flights!

Is this a Profit and Loss account code or a Balance Sheet code (there should be both).
Is it Quickbooks by any chance?

[kryten22uk]

Eric Mc said:

Is this a Profit and Loss account code or a Balance Sheet code (there should be both).
Is it Quickbooks by any chance?

Sorry, no idea. Not QuickBooks, just something my dad created/uses.

[Eric Mc]

Is it a fully balancing double entry system or just a simple schedule of income and expenditure and related summaries?

[kryten22uk]

Eric Mc said:

Is it a fully balancing double entry system or just a simple schedule of income and expenditure and related summaries?

I would think its the latter. Its only a simple way of adding up income and putting outgo into buckets. When I fill in an outgo, i jsut say who the payee is, how it was paid, how much it was (incl how much VAT if relevant), and what expense code (ie transport, computers, VAT paid, Tax paid, Sundry). Then I can print out summaries which show nominal summaries which seem to group the outgos by the expense code.

TBH I dont really use the software for much, but I like to think it helps the accountant, who does all the hard work really.

[Eric Mc]

That's fine. Just list it as an expense.

The reality is that it is part of last year's costs and the accountant should have included it in last year's accounts.
He/she will know what to do.

[kryten]

Question is, do you have to declare the airmiles on your P11D?!

[kryten22uk]

Eric Mc said:

That's fine. Just list it as an expense.

The reality is that it is part of last year's costs and the accountant should have included it in last year's accounts.
He/she will know what to do.

[Eric Mc]

kryten said:

Question is, do you have to declare the airmiles on your P11D?!

I would argue that you don't. The benefit needs to have been provided by the employer.
I don't see how airmiles provided by a third party could be construed as being supplied by the employer.
I know the Revenue can slap a BIK on someone who has received hospitality from a third party - but I think airmiles might be pushing things a bit.

[Brown and Boris]

Eric Mc said:

kryten said:

Question is, do you have to declare the airmiles on your P11D?!

I would argue that you don't. The benefit needs to have been provided by the employer.
I don't see how airmiles provided by a third party could be construed as being supplied by the employer.
I know the Revenue can slap a BIK on someone who has received hospitality from a third party - but I think airmiles might be pushing things a bit.

Our boss used to make us hand over the little boxed toy cars BP used to give away, saying it was a BIK.

[Eric Mc]

He wasn't called Scrooge by any chance?