Was the company trading?

Was the company trading?

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A family business, with 3 directors, unincorporates leaving one director to take on the business as a sole trader. This happens at a company year end.

However, in the transition, various direct debits leave the company bank account, and clients (especially BACS ones) pay the Ltd Co, not the sole trader. So for the first few months the sole trader (director) is effectively using the Co. Account as his own until it becomes dormant.

They are technically his income and expenses, but does the company need to issue invoices to clear these items or can it be deemed as non-trading? It is dormant now.

Thanks.

Jenni Frost

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JPW
By jpwattam
16th Jul 2007 19:09

Non-trading I think
Hi Jenni,

I'll try to answer as no one else has. To my vague recollection, a company is trading for corporation tax purposes if it has income and expenditure.

What you've described is transactions going through the company bank account that shouldn't. The related income and expenditure is that of the sole trader, and is recorded in his books.

This is like when someone accidentally pays the invoice of A to B instead (eg because of an error in bank details). In such a case, B sends the money back to you to resend to A. In your example, B has a relationship with A and can just pass the money over.

In conclusion, as long as it's clear that the money flowing in and out of the company bank account does not belong to it, I think it's non-trading.

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By AnonymousUser
17th Jul 2007 08:09

Thanks Julian, that's what I was thinking, but just wanted to double check!

Jenni :o)

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