ClIENT WITH PERSONAL DRAWINGS

ClIENT WITH PERSONAL DRAWINGS

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Hi,

One of my prospective clent who is self employed want me to take over from his existing accountant. He want to registed a private limited company and want to start trading through the company. from what I found from his books and bank statments was that he draw lots of small amouts of funds from his bank account for his personal use and some time transfer fund int to his bank account from his friends or by himself when there were any need for funds. And he want to trade exactly the same way as he does now

My question is if this is managable , if I register a limited company and post these personl transactions through current account without letting the directors current account going into negative. there are advanatge registering a limited company vs self emplyed but given the nature of the way he condcut business I wonder if it's worth me taking him as my client considing amout of book keeping and information chasing I need to do. Much appreciate any comments!!

Annual Turnover : 300,000

Type of Business : Service station

Many Thanks

Replies (4)

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By johngroganjga
18th Jan 2015 18:38

One of the adjustments the client will have to make if he wants a company is that he will have to learn, with your help presumably, that the company's money is not his until he takes a salary or dividend, with the various formalities they entail.

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Replying to pauljohnston:
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By [email protected]
19th Jan 2015 11:20

Thanks

Is it perfectly ok to deal all these personal  transactions through directors current account? Will HMRC treat this suspicious!

Many Thanks

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By johngroganjga
19th Jan 2015 11:37

I'm not sure what you are asking about HMRC being suspicious about anything.

Your client can arrange his affairs however he wants.  How he chooses to do so is none of HMRC's business.  Their business is just to collect whatever tax is due from the company or from him as a result of the decisions he makes.

Taking all his withdrawals from the company as loans is likely to be by far the most expensive way (tax wise) for him.  If you do not understand the tax consequences of shareholders borrowing money from their companies you should perhaps send your client to an adviser who does..

 

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By User deleted
19th Jan 2015 11:42

But John ...

... the OP does appear to understand the tax consequences of a director/shareholder borrowing money from his company - why else would he refer to keeping the balance on the loan account positive? Of course, whether or not the individual can achieve that, and the advice given to the client on the topic, is another matter.

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