Director's current account - fuel costs and expenses

Director's current account - fuel costs and...

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The situation is that my husband has a personal vehicle that is used heavily for work purposes for our limited company, but due to the personal use of the vehicle, it's not worth it being a company vehicle.

At the moment, all vehicle related costs are being paid for out of our personal bank account, and then the company pays mileage expenses.  So we're doing it all properly.  The company reclaims VAT based on the date of the expenses payments at the right rate for the car engine size.

For various reasons, I'd like to change to paying for all fuel for that vehicle through the company's credit card.  All transactions would be posted to our DCA - the company owes us £20k, so I presume there are no issues with that arrangement.  Then I'd just like to post the expenses payment as a dr mileage expenses cr DCA transaction, with no actual cash moving out of the company.  Would that be a problem for HMRC on either the PAYE (my husband is an employee of the company, but not a director) or VAT (reclaiming VAT when no cash has changed hands) front?

Is there anything else I've missed?

Thanks in advance for any replies,

Anna

Replies (11)

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By johngroganjga
20th Apr 2014 07:52

No there is no problem, but why over-complicate? Just take regular cash withdrawals out of the loan account to cover the fuel purchases. Much simpler.

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Replying to bernard michael:
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By dna_accounts
20th Apr 2014 12:21

Thanks John

I generally don't like to over complicate, but cashflow means that there isn't always enough cash in the company to pay the expenses at the right time.  The £20k was lent to the company many years ago, and it's never had enough cash to pay it back to us.  I live in hope though...

The reason for doing this is that I want to remortgage towards the end of this year, and I'd like to tidy up our personal bank account in preparation i.e. keep the high fuel costs out of the sight of whoever is now going to scrutinise my bank account under the new mortgage affordability rules.

 

Cheers,

Anna

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By tebthereb
20th Apr 2014 12:29

Credit card "token" rules

There are special rules that apply when using a credit card for private and business purposes that create P11D and Class 1 NIC issues.

There is a decent article here that might help give you the gist of what I am thinking about but the rules are complex and you really need to speak to your advisor about this:

http://www.hobbspayrollservices.com/blog/?p=257

I have nothing to do with Hobbs and I would suggest it is unwise to rely on an article commenting about someone else's circumstances.

can't see a VAT issue but not experienced on that area.

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By johngroganjga
20th Apr 2014 12:35

Well, if the company really
Well, If the company really doesn't have enough cash to repay sufficient of the loan to enable your husband to pay for his own fuel, it also won't have enough cash to pay for the fuel itself.

As you have now explained that this idea is part of a scheme to deceive your lenders as to the true level of your personal outgoings you won't be getting any more help from me. You are aware that this forum is public aren't you?

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By andy.partridge
20th Apr 2014 13:08

Deceptive
This is a curious case where under other circumstances what you have described would be permissible, but it is your intent that prohibits it.

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By dna_accounts
20th Apr 2014 15:08

Embarrassed now...

Hi all,

Thanks for the replies - I honestly hadn't thought of it as deception in that way, just thought it was a way of using the DCA to help to tidy up the personal bank account.  If I had thought of it as deception, I definitely wouldn't have posted on a public forum.  I'm glad I asked now, as it's saved me from doing something stupid.  Back to the drawing board*...

Thanks again,

Anna

*and by that I mean I'll just stick to making sure that there aren't any unnecessary transactions on the personal bank account.  Will certainly stay away from anything that would be dodgy.

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By tebthereb
20th Apr 2014 17:26

Harsh

My apologies but I don't understand this talk about deception etc and intent making this a problem.

The OP is owed money by their company. It is quite acceptable to recharge private fuel to the company as a means of the company repaying that debt.

The company's cashflow/assets does not allow it to repay the £20k debt at once but presumably allows it to clear its debts as they arise etc.

If that makes the OP's bank account look better for mortgage purposes, so what? The main person at risk is the OP once the loan clears, when they may have a bigger mortgage than their net expenses will be able to cope with.

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Replying to Chris Pittock:
By johngroganjga
20th Apr 2014 17:35

So what?

tebthereb wrote:

My apologies but I don't understand this talk about deception etc and intent making this a problem.

The OP is owed money by their company. It is quite acceptable to recharge private fuel to the company as a means of the company repaying that debt.

The company's cashflow/assets does not allow it to repay the £20k debt at once but presumably allows it to clear its debts as they arise etc.

If that makes the OP's bank account look better for mortgage purposes, so what? The main person at risk is the OP once the loan clears, when they may have a bigger mortgage than their net expenses will be able to cope with.

The "so what" is that the lender does not see through the deceit and lends money that he would otherwise retain. The OP is far from being the only person at risk. The lender is of course at risk of having lent money that will not be recoverable.

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By tebthereb
20th Apr 2014 19:43

What deception?

The OP has not done themselves any favours by saying that they wanted to tidy up their account to help their bank account survive scrutiny for remortgaging purposes, but I still don't understand why that is a deception.

The OP is entitled to decide to recover a debt from the company by reducing the debt owed to them. If they are prompted to do this for mortgage purposes, where is the rule against that?

The alternative is what - to show their private fuel expenses and show an asset (the £20k due from the company)? Had they proceeded with their plan sooner they would have legitimately had a larger personal account balance and had the benefit of this for remortgage purposes, and nobody would have cared - so why is unacceptable to be prompted to do this now by a desire to remortgage?

If the lender wants details of personal assets and liabilites, as I would assume, they could ask to see details of the company's expenses anyway so I am not even sure that the OP's plan is going to work too well.

If the lender was somehow fooled, which seems highly unlikely to be achievable especially with the new requirements, and is unable to recover the funds loaned to the OP, won't they just repossess the asset that the mortgage is secured against? Lender never loses.

 

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By dna_accounts
20th Apr 2014 22:22

Just to jump in again with some more info...

...which may not help the debate, but it's worth saying, even if everyone here thinks I'm completely stupid (which is how I'm feeling).

The company is just a sideline for me - I keep it going in the hope that I'll get my £20k back one day.  My husband is employed by the company.  The mortgage is only in my name.  My mortgage is, and will be, based solely on the salary that I get from my full time employer (a completely unconnected party) and my salary has gone up 35% since I got the mortgage on the same house 2 and a bit years ago.  The remortgage will just be to fix the interest rate for a further 3 years at the end of this year.  So I'm not trying to fleece a lender by trying to get more than is sensible.  And I won't mention the DCA asset in the company in the mortgage application, because it's not relevant - I may never get it back.

It's my husband's car and fuel expenses (for the company that we're both shareholders of and I'm the only director of) that are currently going through our joint personal bank account and making it look a bit erratic.  The company is paying its way, but cashflow is a bit rubbish.  That's all.

However, after all the comments on here, I'm definitely staying away from my original idea.

Hope this informs the debate...

Anna

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By SwanseaJack
20th Apr 2014 22:35

I agree - No deception

The way that I understand the OP's question is whether it is okay for the company to pay for fuel, the majority of which is for business purposes, directly.

The motive for changing the methodology is to remove a number of high value business related transactions from their personal bank account.

dna_accounts wrote:
At the moment, all vehicle related costs are being paid for out of our personal bank account, and then the company pays mileage expenses. 
 

The proposed change will not only remove the payments for the fuel, but also the cash received for the mileage expenses - and if those expenses are being paid at the FPCS rates, then the reduction in income could even be higher than the reduction in payments for fuel.

Segregating business expenses from personal expenses running through their personal bank account is not deceptive - it aids understanding of the true level of personal expenditure.

 

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