Use of personal bank account for company transactions

Use of personal bank account for company...

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I am keen to avoid business bank account charges, and would so prefer to open an additional personal bank account, and use that for company transactions.

Would ther be any problems with this arrangement.
Arnold Smith

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Teignmouth
By Paul Scholes
04th Dec 2004 00:55

Tax enquiry problem
My clients did this for the first 5 months of their company because the business took off and they didn't have the time to open an account in the company's name (chances are they weren't advised properly at the time either).

Despite the "technical" problem mentioned below the Revenue were OK with this because it was clear that in reality this was the company's money and that the directors had no intention of using it for personal means. However it enabled them to inspect all the directors' other accounts and means when they opened a full enquiry on the company's accounts in that first year.

So don't do it.

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By chriswalter1801
03rd Dec 2004 18:49

Not neccesarily
I had a client in exactely this predicament.

We had an EGM prepared to say that the bank account that was in the Directors name was being held on behalf of the company and that any funds held in this account and interest earned was the property of the company.

This way, the director is not getting any benefit and shouldn't be liable to any BIK.

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By AnonymousUser
03rd Dec 2004 12:14

Thanks Neil
Succinct and useful.

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By NeilW
02nd Dec 2004 11:50

Yes.
If the bank account is in the directors personal name then you will be hit with three things because technically the account is a loan to the director.

(i) The company will be taxed on the loan outstanding at the year end.

(ii) The director will be charged with a personal benefit in kind for the 'use' of the loan.

(iii) You would be in breach of the companies act because it is illegal to loan more than £5000 to a director.

So overall it is not a good idea.

However there is no need for any business to pay bank charges. All you need do is open the right bank account. See the Abbey National at http://www.anbusiness.com or the Alliance and Leicester at http://www.alliance-leicestercommercialbank.co.uk for starters.

NeilW

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