Can a director use staff for personal purposes

Can a director use staff for personal purposes

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My client is a limited company and VAT registered. There are two directors (Husband and wife)and they are in the building trade. They want to build an extension to their private house and use the employees of the limited company to do the work. We are thinking that the company should raise a sales invoice to the directors for the labour costs that have been used but this is going to mean that they incur VAT on the cost. They can buy the materials personally rather than through the limited company.

Is there a more tax efficient way of dealing with this, we effectively want to avoid incurring the VAT charge.

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By Carlos_Fandango
19th Apr 2013 09:17

They can buy the materials personally...but they won't (won't get the same discount from the supplier).

They could raise a sales invoice plus vat (but they won't),

God how cynical am I?

I'm just impressed they've told you what they want to do before they've done it!

 

Company does everytihng...invoices the directors nothing, directors get taxed on a benefit in kind on the undervalue, does that avoid a VAT charge?

Better informed people than me will have the answer.

 

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By jemwix
19th Apr 2013 13:23

AFAIK there is no legal alternative but to pay the VAT.

If your clients use their company to have work done on their private property, or if they make any kind of supply to themselves, they must treat themselves the same as any other customer, and charge VAT at the appropriate rate, with an appropriate tax point, so that a sales invoice appears in their VAT return.

Whether they then actually pay the company or run a loan account, or end up having the work treated as a BIK is another matter.

There is also the question of adding a commercial profit onto the sales invoice. I believe that If they don't add a commercial profit to the nett costs they may have to justify this depending on the amount involved and whether they regularly afford the same treatment to other staff.

 

 

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