A company has some surplus funds and wish to place it for, perhaps, six to twelve months on deposit.
The company can get 1% interest. However, 3% is available to a director.
If the money is placed in an account in the director's name, can the company legitimately claim that the director holds this on trust for the company and that there is no benefit in kind ?
For the avoidance of doubt, the money will be held in a separate account and withdrawals will only be made to the company's current account. There is no intention for the director to use this money for her own purposes.
If this can indeed be regarded as held on a bare trust, how will the interest be dealt with ? Tax will be deducted at source, of course. The director is a basic rate taxpayer.
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Reach agreement with HMRC
This has been raised several times in the past. I had a case identical to the above, and agreed with a local Inspector that provided certain conditions were met - primarily that all movements of funds were to and from company - the funds could be treated as belonging to the company.
Interest will be taxed (gross) in the company's hands, with credit for the income tax deducted.
