Director with lots of personal expenses

Director with lots of personal expenses

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If a Director puts lots of personal expenses like personal travel, personal entertaining and holidays etc through his company bank account is it much better just to disallow it all and bung it all through the Directors Loan Account rather or am I missing something?than putting these costs through the books as travel and entertainment expense and then doing P11Ds etc? I can't see there are any tax advantages to putting the expenses and benefits through and then doing a P11D .. or am I missing something?

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By soundadvice
19th Apr 2015 20:04

Sorry typing error in OP

If a Director puts lots of personal expenses like personal travel, personal entertaining and holidays etc through his company bank account is it much better just to disallow it all and bung it all through the Directors Loan Account rather than putting these costs through the books as travel and entertainment expense and then doing P11Ds etc? I can't see there are any tax advantages to putting the expenses and benefits through and then doing a P11D .. or am I missing something?

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By duncanedwards
19th Apr 2015 20:21

What is the director's preference? Is this activity deliberate or just what happens?

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By soundadvice
20th Apr 2015 09:42

I have inherited this client from another accountant. Historically he has incurred alot of expenditure on his personal credit cards and then claimed alot of this back from his limited company.

Unless I am missing something this all seems rather pointless as alot of the expenses are personal (ie personal travel, entertaining, hotels even holidays) and I can't see anywhere to put them instead of Directors Loan Account .. in which case why does he bother reclaiming them in the first place.

If I debited various expense accounts with these payments they would then go on his P11D and then his SATR where the expenses could not be reclaimed under S336 because they are clearly nor wholly, exclusively and necessarily business.

The whole thing seems a pointless waste of time but I just wanted to check I wasn't missing anything before I told my client.

Many thanks

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By Tim Vane
20th Apr 2015 10:12

I think what you have here is a client who needs re-educating, or dumping. He must surely know that all these expenses are not allowable as tax deductions as they have nothing to do with his business. He must also know that by continuing to claim personal expenditure against his company he is effectively trying to put one over on the tax man, and he is expecting you to make it happen.

If he does not realise that the expenses are just added back and make no difference to his tax position and serve no other purpose than to increase the amount of time it takes to sort out his books, then he needs to be told this, and told to stop doing it.

If he doesn't stop doing it, or somehow expects you to allow these deductions then you must just tell him you can no longer act for him, as you are then in an untenable position.

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By soundadvice
20th Apr 2015 11:19

No to be fair this is a client who has no interest in accounts or tax which is why he employs an accountant.

The problem is that he just does things the way his previous accountant told him; I have no reason to doubt this because otherwise there would be no point him trawling through all his credit card statements to make a claim for expenses which are then disallowed which frankly I agree is completely pointless.

I shall be advising him to just claim back proper business expenses, of which there are few, and save himself some time. 

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