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Does this count as a company loan?

I'm doing the accounts for a small business that gets all of its income in cash. In order to avoid bank charges the owner had been paying cash into his personal account before transferring the money directly into his business account. I am confident that the only reason he was doing this as the bank charges for paying into his business account was expensive for such a low profit business. However, I am wondering whether I should suggest that he stops doing this as HMRC may consider this to be a company loan.

Any advice on this would be greatly appreciated.

Many thanks

David

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24th Jun 2012 12:25

That Depends

Is it a limited company?

 

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By pawncob
24th Jun 2012 18:50

Like he said

If it's LTD-  STOP NOW.

Otherwise, no probs, but a word to the wise would be useful.

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25th Jun 2012 11:47

Not recommended

Assuming that it is a limited company, paying company income into a personal bank account is not recommended.  Yes - it constitutes a loan to the owner/shareholder which is potentially subject to s.455 tax, but if he transfers the money immediately into the company bank account, he has repaid the loan and there would be nothing outstanding at the year-end, so no s.455 tax would actually be payable.

There will be accounting and possibly tax problems if he retains some of the cash in his personal account either to pay for company expenditure or by way of his own salary or dividends.

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By davetxu
25th Jun 2012 21:18

Dear all,

Many thanks for taking the time to reply, it is very much appreciated.

 

Yes I confirm that it is a limited company

 

Kind regards

 

David

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26th Jun 2012 13:12

Whilst Euan has covered the s455 aspect there is also a P11d iss ue.

If he holds more than £5,000 of company money at any time, even for 1 day, there is a P11d reporting requirement and a benefit in kind with implications for income tax and Class 1A NICs.

 

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