Recognizing Partnership Bank Account in Connected Limited Company

Recognizing Partnership Bank Account in...

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Hi

We have a Partnership and two limited companies the owners of the partnership each have a Ltd company, x & y. What has happend previously is that a portion of the partnership bank balance has been included in the limited companies x & y, in my opinion a Ltd company should should only be including Ltd company bank accounts as a current asset?

Am i correct in thinking this should be show as a directors loan and not an other debtor from the partnership? Thus triggering S455 tax?

Any comments appreciated.

Replies (18)

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By johngroganjga
24th Jul 2015 10:01

Yes that's right.  Although

Yes that's right.  Although the S455 position can presumably be rectified in an instant by moving cash around in the bank accounts.

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By petersaxton
24th Jul 2015 10:33

I don't understand

Why should you show anything relating to the partnership in the limited company accounts?

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Replying to Moonbeam:
By johngroganjga
24th Jul 2015 10:43

Error

petersaxton wrote:

Why should you show anything relating to the partnership in the limited company accounts?

The OP's point is that doing so was an error which now needs to be corrected.

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By User deleted
24th Jul 2015 10:33

Trade?

Is it trade related? Or purely and simply a Cash balance that has been repatriated?

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By User deleted
24th Jul 2015 10:36

trade related

 

Indeed trade related

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By petersaxton
24th Jul 2015 10:49

So why this?

"Am i correct in thinking this should be show as a directors loan and not an other debtor from the partnership? Thus triggering S455 tax?"

Shouldn't the accounts be redone (if material) but nothing to do with a director's loan or debtor? I don't know what the double entry was to get the partnership bank account in the limited company balance sheet in the first place!

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By User deleted
24th Jul 2015 10:51

Trade? Are you sure?

Nelly G wrote:

Indeed trade related

 

So, there is a debit balance on the company balance sheet that relates to Trading invoices raised between the company and the partnership.

In other words, the partnership does actually owe the company monies, to settle a trade related debt?

 

If this is the case, I don't believe it's an error at all. And there should also not be any s455 implications - provided it's an arms length sale you should be safe.

 

However, the title about the partnership "bank account" is probably a little ambiguous.

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By User deleted
24th Jul 2015 10:58

 

 

I doubt there would have been any invoicing as such, just transfer of money. So are we saying acceptable to show as a current asset, say money held by partnership.

 

I am not comfortable including as a bank balance as previously.

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By petersaxton
24th Jul 2015 10:59

Nelly

You need to understand how the balance arose.

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By User deleted
24th Jul 2015 11:01

So not trade related then?

Good one

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By petersaxton
24th Jul 2015 11:01

Let's try again

Are you saying that the limited companies lent money to the partnership?

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By User deleted
24th Jul 2015 11:23

 

 

The partnership is an expense share, income goes into partnership bank account and expenses paid but not all profits are transferred out to limited company! No formal invoicing as such in place i believe.

So the partnership is holding funds of the limited company 

 

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Replying to DJKL:
By petersaxton
24th Jul 2015 18:53

Expense share

Nelly G wrote:

The partnership is an expense share, income goes into partnership bank account and expenses paid but not all profits are transferred out to limited company! No formal invoicing as such in place i believe.

So the partnership is holding funds of the limited company 

Why doesn't the partnership maintain a small balance to pay expenses and these funds are provided by the partnership? Why get the limited companies involved at all?

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By User deleted
24th Jul 2015 11:39

Is the company a Corporate partner?

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By User deleted
24th Jul 2015 11:53

 

 

The two company owners (individuals), are the partners in the partnership.

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By BlueVark
24th Jul 2015 12:32

20

I like a good game of 20 questions!

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By mabzden
24th Jul 2015 12:41

Trust arrangement?

Is money just being held in the partnership account (in Trust) on behalf of the companies? This may be to pay, or partially pay, future liabilities of the companies such as Corporation Tax. So it may just be held in the partnership bank account for historical or practical reasons on behalf of the companies.

If so, it's not ideal but HMRC may take a lenient approach to it in the case of an enquiry. I've never come across HMRC applying the strict rules about Directors' loans if money is held in Bank Account A rather than Bank Account B. If the money has been spent by the Directors that's a different story.

When I come across this type of issue I normally explain to the client the "right" way to do things and warn that they're taking a risk by not keeping the money in the company bank accounts.

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By petersaxton
24th Jul 2015 18:55

If expenses relate to limited companies

then the partnership can invoice the limited companies for any expenses incurred on their behalf.

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